When you think about the issues facing British businesses today, what springs to mind first? Is it access to finance? Or perhaps the skills shortage? One thing you might not have thought of is the late payment of invoices. Yet late payments are prolific and can have very serious business implications for suppliers and purchasers alike.
We asked 500 British businesses about their supplier invoicing processes and found that more than three quarters have paid their suppliers late. These delays are felt all the way down the supply chain – and can hit smaller businesses hardest.
Late payments can seriously impact upon a company’s cash flow, causing many to hold on to funds to meet their obligations. If they’re paid on time, firms can make better use of this money by investing in new technology or using it to hire staff and grow their businesses. Unfortunately, instead of pursuing these opportunities many companies are forced to expend a huge amount of time and energy chasing payment for work that they’ve already done.
The situation is now so serious that the Government has stepped in and announced plans for a small business commissioner for whom late payments will be top of the agenda. The commissioner will help by mediating disputes and raising awareness of the problem among larger organisations. This awareness will prove crucial as many businesses just aren’t aware of the scale of the problem – despite facing mounting penalties as their suppliers fight back.
In fact, more than one third of businesses asked said that they have faced charges for paying their suppliers late, one in five have seen their orders cancelled and a quarter have even had a supplier refuse to work with them because of the late payment of invoices. Yet still more than two thirds of businesses believe that they pay invoices in a timely fashion.
The issue is that many businesses are operating blind. One in ten businesses we spoke to are unable to accurately forecast their cash flow in relation to supplier liabilities at any time – meaning many may have no idea of the true health of their business.
Businesses have got to improve the visibility of their payment processes. They need real-time insights into their liabilities and cash flow to manage expenditure accordingly. The current situation simply isn’t sustainable, for suppliers or purchasers. If something doesn’t change, serious cracks will start to appear within the economy.
There can be no ifs, buts or maybes. Because when it comes to paying invoices, late is barely better than never. Read more here.