One in ten don’t understand their supplier liabilities
London, 28 October 2015 – Research released today by Concur, the world’s leading provider of expense and invoice management solutions and services, has highlighted how prolific late payments are across the UK, with 78 per cent of companies having paid their suppliers late. Furthermore, one in ten businesses are unable to accurately forecast their cash flow in relation to supplier liabilities at any time, meaning many organisations may have no idea of the true health of the business.
The survey, which questioned 500 businesses about their supplier invoicing processes, highlights the very serious business implications of late payments, not only for suppliers but for purchasers too. More than one third of businesses reported that they had faced charges for late payment of supplier invoices, 22 per cent had seen their orders cancelled and a quarter had even had a supplier refuse to work with them because of the late payment of invoices.
David Vine, UK SMB MD at Concur, commented: “What this research demonstrates is that late payments are not happening ‘every now and then.’ It’s an epidemic that has potential to blight British business and create a significant cash crunch. Is it any wonder that businesses find themselves on the receiving end of pre-emptive action from suppliers when one in ten are effectively operating blind?
“The issue is that every time a business pays a supplier late, it is felt all the way down the supply chain, arguably hitting smaller businesses the hardest. As companies face cash flow issues stemming from late payments, many hold on to their funds to meet their most critical obligations. This is money they could be investing in new technology or using to hire staff and grow their businesses,” Vine continued.
Recognising the severity of the situation, the Government has recently stepped in to try and tackle the issue. Through plans for a small business commissioner to focus on late payments, its aim is to support small companies – by mediating disputes and raising awareness of the problem among larger organisations. Efforts to increase awareness will prove crucial as businesses themselves have yet to grasp the scale of the problem. Despite facing penalties for late payment, two thirds of respondents believe that they pay invoices in a timely fashion – a view clearly at odds with the number of late payments being made.
Indeed, suppliers are forced to expend a huge amount of energy chasing payment for work that they have already done. 88 per cent of respondents report that their organisation receives calls from suppliers requesting updates on the payment status of their invoice, and around seven in ten say that this happens at least once a week. Over one in three companies are chased for updates more than once every day. Of respondents whose organisations receive calls from suppliers requesting updates on the payment status of their invoice, around three in five report that it is difficult for their organisation to provide an accurate update.
Vine concluded: “There are no ifs, buts or maybes, businesses have got to improve the visibility of their payment processes. They need to have real-time insights into their liabilities and cash flow and 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.”
The research was undertaken by Vanson Bourne during August and September 2015.