Meeting documents
Corporate Scrutiny Sub-Committee (DCC)
Monday 24 May 2004
Meeting: Corporate Scrutiny Sub-Committee (County Hall, Durham - Committee Room 1a - 24/05/2004 10:00:00 AM)
Item: A3 Best Value Performance Indicator-Creditor Payments
| Scrutiny Sub-Committee for |  |
| Report of Stuart Crowe, County Treasurer |
Purpose of Report
1 To respond to the Sub-Committee’s request for information on progress with the Best Value Performance Indicator (BVPI) that requires payment of creditor invoices within 30 days of the date of receipt of the invoice.
Background
2 The purpose of this BVPI is to measure whether the County Council pays its invoices on time, and should be set in the context of current legislation that allows suppliers to charge interest for late payment of bills. I would first make a general point about the effectiveness of this BVPI. It is our objective to pay suppliers within 30 days, but we are reluctant to pay too quickly, as this would adversely affect the cash flow of the County Council and is not therefore in its financial interests. I therefore approach this particular BVPI with mixed feelings.
3 Furthermore, the nationally set BVPI 'target' of 100%, although it is something to strive for, is unrealistic. We are members of a CIPFA Benchmarking Club for creditor payments, and statistics from this confirm that in 2003 the national average for County Councils in the Club was 91% compared with our 89%.
Action taken
4 We consider that a significant reason for the apparent shortfall in performance referred to in 3 above is in fact cosmetic. The BVPI measures time from the date of receipt of the invoice to the date of payment. As many authorities, Durham included, do not record the date that an invoice is received (as this would be unnecessary bureaucracy), we have assumed in the past that it takes 2 days from the supplier invoice date to the date of receipt in a County Council service area. This is in line with the original Audit Commission advice. We understand from our benchmarking partners, however, that many authorities are making more generous assumptions, with anything up to 9 or 10 days used. The effect is that we 'start the clock ticking' earlier than most authorities. We consider that the original advice from the Audit Commission is unrealistic, and we are negotiating with our External Auditor a more reasonable elapsed time of 5 days from invoice date to receipt, with performance records backdated to 1st April 2004.
5 Secondly, as part of the 'electronic agenda' we continue to improve the automation of processes. 65% of invoices are now received by the County Treasurer electronically. These and the 35% received manually are paid using a computer system that facilitates the 'remote' entry of the purchase order.
6 Last year we launched an initiative to pay suppliers using the Bankers' Automated Clearing System (BACS), with remittance advices being emailed and faxed. This is proving very successful, and already 64% of invoices are paid by BACS.
7 As the process of verifying and paying suppliers’ invoices is a task jointly shared between services and Treasurer's, we now hold regular performance meetings with service staff in order to raise the profile of the 30-day payment BVPI, and to identify any process issues that may improve speed and efficiency.
8 Furthermore, in Treasurer's we have set our own performance target, which is to process all manually-received invoices within five days of receipt in Treasurer's. During the last quarter we have achieved this.
9 We are encouraging services to set similar targets for their part of the process (i.e. checking the invoice against the order, authorisation and coding). Service finance staff are now aware of the importance of BVPI No 8. We have asked them to investigate, however, whether a lack of priority at the point of receipt of the invoice, which is often a front line service area, could be a contributory cause of any delay.
10 Finally, as part of the Best Value Review of Business Support Services, the creditor payment process is being examined. Any process changes will have regard to the need to move towards this BVPI target.
Concluding remarks
11 I referred in paragraph 2 above to the legislation which enables suppliers to charge interest for late payment of bills. The County Council has not incurred any charges for late payment.
12 In summary, although we have some reservations about this BVPI in principle, and on whether all authorities are collecting information in a like-for-like manner, we are striving to improve our figures by the combination of means described above.
| Contact: John Hope Tel: 0191 383 3367 |
Attachments