- Oxford University Hospitals Foundation Trust has slowed down invoice payments to boost its cash balances
- Audit committee cited several risks around this, including potential “bankruptcy” for firms dependent on payments from the trust
- Trust says measures ensure firms are no longer paid “early”, and were not designed to breach the statutory 30 days period
A Shelford Group provider has risked damaging relationships with external suppliers by slowing down its invoice payments to boost its cash balance.
Oxford University Hospitals Foundation Trust said the measures simply ensure that firms are no longer paid “early”, and were not designed to pay companies later than the statutory 30 days.
It implemented the measures after an external review identified several weaknesses in its cash management and recommended various “cash generating” opportunities.
Committee papers from April 2018, seen by HSJ, said the trust would gradually remove a “pull forward” mechanism on invoice payments, among other measures. The “pull forward” was deployed to pay invoices a week early, to provide a safeguard against invoices being paid late.
The papers cited several risks in taking this measure, including;
- “significant risk of damaging supplier relations”;
- “weakened trust position” in negotiating new contracts and prices;
- “significant risk of unmanageable workload” in dealing with the fallout from suppliers;
- and; “risk of supplier bankruptcy” for firms which are dependent on trust cash to pay their own payroll.
Asked to what extent the risks have materialised, the trust said: “On occasion since implementation the ending of deliberate early payment has resulted in some suppliers being paid later due to administrative errors. These issues are dealt with on a case by case basis and payments are made to suppliers to rectify any unintended late payment.”
The FT said it has continued to pay around 90 per cent of non-NHS suppliers within 30 days, against the 95 per cent target.
This compares favourably to many other trusts which have deployed more extreme measures to delay invoice payments. HSJ has previously identified dozens of providers which are paying less than half their bills on time.
The external review was commissioned from KPMG in November 2017, when the trust’s deteriorating income and expenditure position began eating into its cash balances.
One of the weaknesses in cash management identified was that around one in 10 purchase orders were being raised “retrospectively” (after an invoice had been received). This was despite a “No PO = No Pay” policy. KPMG recommended that “appropriate action” be taken against repeat offenders.
The trust currently has conditions on its license with NHS Improvement, in part due to a “failure of governance and financial management arrangements”.
It reported a deficit of £6m in 2016-17, against a planned “control total” surplus of £17m. Last year, it reported a deficit of £14m against the planned surplus of £19m.
In 2018-19, the trust has accepted a control total surplus of £10m, and was £10m in deficit after the first four months of the year. The trust said it expects to report a surplus in the second quarter, while other “one off” accounting measures and transactions are expected later in the year.
Jason Dorsett, who has been finance director since October 2016, said of the review: “The trust accepted most of the recommendations and has been working to implement them. This has resulted in higher cash balances which in turn has reduced the capital charges (public dividend capital dividend) levied by the Department of Health and made more cash available for investment.”
Audit committee papers