GAO: E-invoicing could reduce DOD late payments

The Defense Department should strengthen its implementation of Wide Area Work Flow (WAWF), a Web-based tool, to reduce its late payments to small businesses, according to the Government Accountability Office.

GAO surveyed nine locations and found that DOD makes about 10 percent of its payments late across the board, but the number rises to 14.5 percent when only small businesses are counted.

The blame lies largely with systemic weaknesses, including DOD's continued reliance on paper payment documents, which results in misplaced documents, duplicated data entry, higher processing costs and, ultimately, delays in making payments.

DOD has invested in the WAWF tool, but has not put the needed management focus and strategic direction behind it for it to be successful, GAO found. In particular, the program lacks performance metrics and a clear strategy for ensuring that it is used well.

GAO interviewed 17 small businesses to gauge the consequences of late payments. Small businesses are generally considered the most vulnerable to harm from customer tardiness because they have fewer resources to rely on while waiting.

In those interviews, GAO found:

* Fourteen businesses had to get a line of credit or use personal funds to continue daily operations while awaiting late DOD payments.

* Eleven of the 14 that got a line of credit said that the interest they paid for the credit was more than the amount DOD paid them in late-payment interest. Ten contractors said they often do not receive any interest on late payments from DOD, but GAO was unable to verify that.

* Three of the 17 small businesses said the late payments had a severe enough effect on cash flow that they were seriously concerned about their ability to stay in business.