E banking saves time and money

Tim Rayner looks at how the City of Edinburgh Council used E-Banking to vastly improve efficiency.

Case Study : City of Edinburgh Council

Payments ‘safe as houses’ in Edinburgh

City of Edinburgh Council logo

“We predict that the value of the work carried out over the course of 2005 will amount to £13 million, which could have meant up to 14,000 paper invoices. In processing these, the cost to us in terms of time spent on administration, plus the risk of inaccuracies and human error, is significant – amounting to approximately £65 per transaction.

“[The TDM system] is a win/win situation for all parties concerned,” says Tim. “Punctuality of payments means that cash flow for the contractor is dramatically improved – often they are paid by us even before they have been charged by their suppliers. On our side, all unnecessary administration time has been cut, allowing staff to be redeployed into more frontline services. Instead of 14,000 paper invoices, we now receive just 12 [statements] (one a month) from the bank”.

“Supporting safe buildings in our community.” This is the mantra behind City of Edinburgh Council’s latest initiative to improve public safety in and around all buildings within its remit. As a Council in Scotland that can still enforce repairs on private property, it has a very active property conservation section, responsible for monitoring the condition of buildings in the city and organising maintenance work where required. In line with this concern for safety, City of Edinburgh Council is also in need of a robust and streamlined payments system behind the scenes, in order to ensure that repairs and works can be carried out quickly, efficiently and with the minimum of bureaucracy. For this reason, it chose to partner with The Royal Bank of Scotland in creating an automated Transaction Data Matching (TDM) system.

Senior Conservation Officer, Tim Rayner, explains: “City of Edinburgh Council manages one of the UK’s largest stocks of heritage public buildings and landmark properties, as well as 215,000 living units, of which nearly 70% are privately owned.

“In the interests of public safety, we are empowered to serve notice on any owner, public or private, who is not keeping their property in the appropriate state of repair. As a result, we serve around 20,000 statutory notices a year and carry out about 2000 projects. Managing the ensuing payments to contractors with just five people in our finance team has been an onerous task, to say the least.”

Prompted by a growing awareness of public safety, a range of reforms were introduced, central to which was a more efficient and less costly invoicing and payment system for building maintenance contractors. To achieve this, Tim Rayner worked with The Royal Bank of Scotland Commercial Cards in adapting the standard Visa GPC (Government Purchasing Card) and designing an innovative, bespoke solution to cater for City of Edinburgh Council’s specific needs.

“Whether it’s a blocked drain or a serious subsidence problem, we arrange for the work to be carried out and then charge the owner of the property for that work, plus an administration fee. The contractors that do the work for us are mostly on ‘term contracts’ which means that they have given us good rates, which are then fixed for a set period.

“We predict that the value of the work carried out over the course of 2005 will amount to £13 million, which could have meant up to 14,000 paper invoices. In processing these, the cost to us in terms of time spent on administration, plus the risk of inaccuracies and human error, is significant – amounting to approximately £65 per transaction. In addition, we had no mechanism to track payments. Contractors never knew who was dealing with their particular invoice and, due to the inefficiencies, the payment window had stretched beyond the 30 day legal limit set by contractors before they charge interest.”

“We considered a range of strategies and, as we bank with the Royal Bank, and use Visa GPC elsewhere in the Council, it seemed natural to work together in tackling what had become a dire situation.”

The Royal Bank and the Council set themselves three core goals. These were to pay the contractors as quickly as possible, ideally within 48 hours of sign off of the invoice; have a transparent, simple process through which invoices could be easily tracked; create a ‘paperless’ back office.

Tim continues: “Over the course of a year we worked very closely with the Royal Bank and Purchasing Card Consultancy Limited (PCCL), a business partner of the bank. The TDM solution we created is based around a website onto which all projects and contracts are loaded. The works orders for contractors, pertaining to each project, are then issued on the website and each contractor is able to log on, with a unique password and PIN, to access the purchase order which is stored on a web page. They can then issue an invoice from the purchase order on the system and track it via cost centres.

As a result of the ‘term contracts’, each fixed rate for a certain job has its own item number. For example, the contractor can input the code relating to ‘demolish wall’ plus the number of square metres to be demolished and the invoice figure will be automatically generated. There is also the opportunity to enter the full detail and amount for job that may be ‘unscheduled’, as the scope of projects is often hard to predict.

On the Council side, the officer dealing with a particular project can log into the site every day and see the invoices. He can either approve them to be paid in full, straight away, or, in the event of any anomalies, can amend the amount online to one he is happy with, sign that off to be paid straight away, and arrange with the contractor to discuss the matter ‘offline’. Whatever the situation, the contractor can clearly see at all times who is dealing with the matter and at what stage in the process it is.

The new TDM system therefore ensures that, regardless of a query, there is no hold up and the contractor is paid, at least in part, within 36 hours if they are a Royal Bank customer, and within 48 hours if not. (Previously, any query meant cancelling of invoices, issuing of credit notes, postage back and forth and a potential delay in payment of weeks)

workflow diagram

“It is a win/win situation for all parties concerned,” says Tim. “Punctuality of payments means that cash flow for the contractor is dramatically improved – often they are paid by us even before they have been charged by their suppliers. On our side, all unnecessary administration time has been cut, allowing staff to be redeployed into more frontline services. Instead of 14,000 paper invoices, we now receive just 12 (one a month) from the bank, grouping all invoices for that period onto one statement. Contractors are paid in the shortest possible time frame and we settle the account with the bank in one simple monthly transaction.

“Above all our relationship with the local contractors, who are in short supply and are extremely valuable to the Council and its current ‘Safe Buildings’ endeavour, is vastly improved.”

At a human resources level too, the transparency of the new system makes it possible to monitor staff and see who is not signing off invoices when they should be, therefore eliminating inefficiencies and previous inaccuracies which resulted in a 3% failure rate at the council. If someone is absent, it is now very easy to see what they were working on, and redistribute their work load to ensure that there are no delays.

The system went live in April 2005, and the Council met with all contractors to explain how it works. A training seminar was held by the Royal Bank of Scotland and PCCL, and contractors were given a pack of information to take away with them. As a result of feedback and the ease with which the contractors were able to use the TDM system, it is expected that future training will take place over the phone.

Six months on, the Council undertook a survey to get further feedback from all users, with a view to enhancing the TDM system further. As major contractor G. Grigg & Sons confirms: “We have found the system, even from the outset, to be very efficient, easy to understand and extremely effective in processing the payment. The previous system was extensively paper and postal based and this, coupled with unduly extensive payment periods, proved to be frustrating. The new payment system has broadly eradicated the previous problems and has contributed to a widely more efficient payment system which has greatly improved our overall cash flow.”

The introduction of the new system was seen by many contractors as an incentive to upgrade their systems and bring more of their operations online. This has resulted in other efficiencies, such as the use of emailed digital photographs between builder and the council when a particular issue needs to be discussed.

Now that all parties are accustomed to it, the system will be continually refined to make it more intuitive and to add more features, such as downloadable pdfs for contractors’ records and the programming of future jobs.

Kevin Boyle, from The Royal Bank of Scotland comments: “We have been happy to invest time and resource in developing TDM for the City of Edinburgh Council and are confident that a similar system could be used by any other Council, or indeed by any organisation which needs to manage payments to sub-contractors.

“We are very proud to have created, in partnership with the Council, the first fully automated invoicing and payment system for Building Maintenance. It is particularly appropriate for this industry, given that customers receive a 2.5% rebate if they pay their contractors within 14 days.

Tim Rayner concludes: “Since the system went live, we have been processing around half a million pounds a month with alacrity! We have certainly achieved all our goals and the system has exceeded all expectations. I would go as far as to say that this programme is the cornerstone of the Council’s ‘Safer Buildings Initiative’.”

Royal Bank of Scotland

For more information please contact Steve Pratt, at The Royal Bank of Scotland Commercial Cards, on 07770 736630or e-mail Steve.P.Pratt@natwest.com

The TDM system is developed and managed for Royal Bank of Scotland by Purchasing Card Consultancy Limited, (PCCL). PCCL is a specialised provider of purchasing card based payment systems for government and private enterprise. TDM is exclusively available to customers of the Royal Bank.

The Council’s card programme is part of the UK Government Procurement Card programme. GPC Visa is managed by Visa and OGCbuying.solutions. For more information go to www.ogcbs.gov.uk and www.purchasingcard.info.


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