Just under half of large businesses admit to paying suppliers late to protect their own cash flow, according to a new report.
In the UK Business Payments Barometer 2018 survey carried out by Bottomline, 44% of businesses with between 250 and 10,000 employees said they pay invoices late in order to protect liquidity or prioritise other payments.
This comes just a year after the government introduced its Duty to Report (DTR) regulation requiring qualifying large businesses to publish information on payment practices, including average time taken to settle invoices.
Applicable to any company with more than 250 employees, £36m turnover or £18m on the balance sheet, the government hoped DTR would help to tackle late payment culture by bringing the worst excesses out into the open. If these latest survey figures are taken as a gauge, it is yet to work.
Overall, just over a third (38%) of companies of all sizes admitted to delaying payments beyond agreed terms to benefit their own cash flow. The figures shed further light on the culture of self interest that lies behind late payments, with significant numbers of businesses of all sizes prepared to ignore contractual terms if there is a benefit to themselves in holding onto overdue monies.
The most common reason cited for not paying suppliers on time was dissatisfaction with quality of service, mentioned by 44% of all companies. This proportion was even higher amongst larger businesses.
After that, 41% of respondents blamed incorrect invoice details on delays in completing payments. Interestingly, this seems to be more of an issue for smaller businesses and their supplier relationships. Amongst companies with between 1000 and 9,999 employees, the proportion mentioning invoicing errors fell to 30%.
The survey contained further indications, however, that suppliers could do more to ensure they get paid on time. Remarkably, a quarter of all businesses that took part in the survey said they paid late simply because the supplier didn’t chase.
You might well think that a professional outfit shouldn’t need hounding to fulfill its contractual obligations on making payments on time. However, with late payment culture being what it is, suppliers can certainly help themselves by double checking invoice details carefully, keeping a close eye on when payments are due and being proactive about chasing them when they are late.
Image "Credit on Calculator” by flickr user “GotCredit” is licensed under CC BY 2.0