Monday, 09 May 2016 11:44

74% of global businesses say late payment is "a fact of life"

When Tesco was exposed for its long payment delays, it exposed an ugly trend among large businesses: delay, delay and delay some more, until your supplier is on its knees. And while the supermarket provided an extreme example of this unethical practice, a shockingly large percentage of global businesses see late payment to suppliers as a “fact of life”.

Basware and Mastercard surveyed 1,015 global businesses to gauge their opinions on late payment, and the results won’t be a surprise to many of our readers:

•    57% admitted delaying payments to suppliers intentionally
•    67% said they pay strategically to aid their own cash flow
•    74% said that late payments are “a fact of life”

You can see other alarming statistics in Basware’s B2B Late Payment Culture infographic.

Interestingly, 9 out of 10 respondents acknowledged that payment delays have wider repercussions. But as long as the law lacks teeth to penalise late payment, or embarrass the perpetrators, SMEs will be left to deal with the financial burden of late payment alone.

Better Late than Never?

The UK’s business minister, Matthew Hancock, announced a new bill in March 2015: the Small Business, Enterprise and Employment Act.

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He wants all businesses to be forced to publish their average time to pay suppliers, the amount of invoices paid outside contract terms, and the total of interest paid on late invoices. This information would be published online, so prospective suppliers could dive into the data and inspect the company’s track record. Business would have to publish figures for the invoices paid within 30 days, over 30 days, over 60 days and over 120 days.

Sounds ideal. Unfortunately, the implementation of the reporting requirement – dubbed the ‘Hall of Shame’ – has been delayed from its original implementation date. A year on from the initial announcement, we’re now looking at implementation no sooner than October 2016 – a full 18 months after the initial announcement.

For many businesses, this far too late, and it’s staggering that this kind of delay is deemed acceptable.

Too Late For Some

According to the Federation of Small Businesses, late payment is one of the top three reasons for SME failure in the UK.

On average, a UK SME is owed £30,000. The issue is costing you, and every other SME in the UK a whopping £40 billion a year.

The government has an excuse for late implementation of the Hall of Shame reporting system. It says that IT projects often fail because they are rushed. This is no interest to the thousands of businesses that are currently unable to pay staff wages, or office rent, or buy supplies they need to trade.

We need to see the government doing something to help SMEs now. For many, late payment is more than an inconvenience. It can mean there’s no money in the pot for the family at the end of the month, and it can stop promising companies from prospering and growing. Late payments can also trigger the domino effect of insolvency that can take out several companies at once, with one SME unable to pay the others.

Half of the UK’s start-up companies fail within 5 years. One-fifth never make it through 12 months. We hope that Anna Soubry, who now has responsibility for this issue, understands how urgent the issue of late payments really is and takes concrete steps to level the playing field for UK small business.

If your company is one of the unlucky ones that finds invoices being paid late, or worst still, not at all then contact us to find out how we can help you recover what is owed.

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