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How to get your invoices paid faster with SAP S/4HANA

When your customer buys your product or service, your accounting department sends him an invoice and hopes for a prompt payment. Many organisations worldwide, however, have customers exceeding the invoice due dates and paying too late or even worse, not paying at all. That’s why your organisation needs to contact your customers as soon as the invoice due dates have exceeded. Chasing customers to get invoices paid is mostly is a very stressful and challenging but indispensable task.

Not following up on unpaid invoices can cause a high financial risk for your company and can even endanger your company’s continued existence. This is because you have already made and prepaid various costs when your product or service has been provided to the customer.

In this blog post, I explain how SAP helps you get your invoices paid quicker and how you can keep your cash flow positive.

Why cash flow is so important to your business

Cash is the lifeline of every company. If this lifeline deteriorates, so does the company’s ability to fund operations, reinvest and meet capital requirements and payments. The need to have a positive cash flow situation is therefore a critical factor for your organisation’s financial well-being and continuity. That’s why it is essential to understand your company’s cash flow health and make the right investment decisions. A good way to judge your company’s cash flow prospects is to look at your Working Capital Management (WCM), which is closely linked to your Accounts Receivable Management.

There are three major cash flow types to be distinguished in each business:

  • The operating cash flow, arising from normal operations such as revenues and cash operating expenses net of taxes
  • The investing cash flow, arising from investment activities such as the acquisition or disposition of current and fixed assets
  • The financial cash flow, arising from raising (or decreasing) cash through the issuance (or retraction) of additional shares, short-term or long-term debt for your company’s operations

In this blog post, I focus on the operating cash flow, since this is a result of incoming customer payments and outgoing supplier/ vendor payments and is therefore linked with the solution to get your unpaid invoices paid quicker.

How your customer’s payment behaviour affects your cash flow

After you have provided your product or service and sent out the invoice to your customer, there are three possible scenarios that each impact your cash flow:

  1. In a best-case scenario, your customer pays immediately upon receipt of the invoice. In this scenario, your cash flow is the least affected because the costs that you have already made for providing the ordered goods or services and for the administrative processing are quickly reimbursed.
  2. In a second case, your sales people have agreed upon diverging payment terms and conditions, allowing your customer to pay later or just pushing them to pay promptly after receipt of the invoice. Depending on the agreed terms and conditions, this situation can impact your cash flow either positively or negatively.
  3. In a third situation, your customer decides not to pay your invoice on time or even not to pay at all. Or he just makes a partial payment, for whatever reason. Of course, this is disastrous for your cash flow.

This third case should sound an alarm and needs to be followed up on time by the responsible person(s) in your organisation. Pushing your customers to get your invoices paid can be a very time-consuming and stressful task. On one hand is the need to push customers for prompt payment. On the other is the desire to keep things cordial, continue doing business with them, and stop the relationship crashing and burning.

From my experiences, in this third scenario, organisations are having difficulties still getting their invoices paid when they are lacking in:

  • A well-considered business process to provide a structure for the team that needs to follow up on unpaid invoices;
  • An implemented IT-solution to collect all the data and inform and support the responsible persons to contact the customers that are not paying their bills;
  • A communication structure to provide transparency and working efficiency among all involved people to follow up on unpaid invoices.
A structured soluting, combining IT Technology, Business Processes and Communication Structures to handle your non-paying customers
A structured soluting, combining IT Technology, Business Processes and Communication Structures to handle your non-paying customers

How cash flow impacts your business growth

A 2014 research of the European Payment Index (EPI) pointed out that Europe’s construction industry sees only 51% of invoices settled within 30 days.

Many businesses report late payment is having a negative impact on their ability to keep or employ people and thus prohibit the growth of their company. As such, one out of two businesses in Construction state late payments contributed to them not hiring.

What you can do to handle customers who delay payment schedules

Receivables and invoice dispute management is a complex, labor-intensive process, especially when past-due accounts threaten your cash flow and increase the risk of bad debt. We have therefore created a checklist, providing you a systematic approach to chasing payments. Please feel free to download our checklist “What steps can I take to get my invoices paid faster?” by clicking the following button. You’ll receive the checklist via EMail after submitting the form.



What steps can I take to get my invoices paid faster?

A strategic solution to get unpaid invoices paid faster by your customers is to get a central IT solution, covering all relevant business processes and also facilitating a streamlined communication process and transparency throughout your organisation.

This IT solution is preferably connected with your ERP system, since all relevant customer and invoice data are stored there. Furthermore, it should enable your staff to log their calls and agreed steps after they have contacted your customers that are not paying your invoices. This keeps all the involved people within your organisation up to date.

A workflow feature is essential, since it increases the working efficiency by assigning tasks to the right people at the right time within your team.

After implementing this central IT solution and agreeing upon a structured work approach, you are able to chase unpaid invoices most efficient. This will result in getting paid faster and therefore your cash flow will be improved.

But how can you do this in SAP?



Learn how to get your invoices paid quicker with Dispute Management in SAP S/4HANA

Watch the webinar

How SAP helps you to get your customer invoices paid quicker

SAP provides an integrated solution for following up on unpaid invoices with their SAP Dispute Management module for FI-AR (FIN-FSCM-DM). This is available in SAP S/4HANA Enterprise Management and is one of the tools of SAP’s Financial Supply Chain Management (SAP FSCM) for capturing, resolving and analysing customer issues in your accounts receivables open issue management. SAP FSCM Dispute Management supplements the process chain Purchase Order – Delivery – Invoice – Payment in the stage between invoice and payment if there are discrepancies with your customer and targets on optimising the financial flows within your company and towards your business partners.

In SAP FSCM DM you have all the data in place to create and list the outstanding dispute cases of customers who haven’t or have partially paid your invoices.

SAP FSCM Dispute Management - Process for handling dispute cases
SAP FSCM Dispute Management – Process

Creating a dispute case in SAP FSCM DM supports the following features:

  • You get an overview of the status and the outstanding amounts of the unpaid invoices
  • You can enter the reasons and root causes of customer issues
  • Role Management: you can assign roles to your team, providing individual persons the authorisation to perform and work on certain dispute cases
  • Documents can be attached to dispute cases and anyone with the right authorisation can access them (central storage functionality)
  • A built-in workflow simplifies the processing of dispute cases among different people. The occasional processors no longer have to regularly check in SAP FSCM DM whether they have dispute cases to process; instead, they receive a notification when this is the case
  • Thanks to the SAP S/4HANA integration, dispute cases are automatically closed as soon as the customer pays the invoice

If you want to see how it’s done in the SAP system, you should click the button to watch our webinar recording and learn how SAP FSCM Dispute Management helps you improve your cash flow and working capital. During this webinar, we dive into our SAP S/4HANA system and show you all features of SAP FSCM Dispute Management. Furthermore, you also learn how you can structure your business processes and communication approach to create a streamlined process and get your invoices paid faster.

For any questions or remarks on this topic, please do not hesitate to contact us

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About the author
Jonas Merken
Jonas Merken
Since 2016, I have been active as a SAP ERP Consultant at PIKON Benelux in Genk, Belgium. My main focus is to improve our customers’ logistics processes within SAP SD and SAP CS. During my career, I have already gathered diverse international experiences in different European countries.

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