Late Payment of Supplier Invoices in Business to Business Transactions
The total late payment debt across UK business in 2015 was estimated to be £26.3 billion, an average of £9,000 for SME’s who said they are affected.
It is said to lead to 50,000 business failures each year.
The European Commission found that in the UK, 30% of businesses indicated that late payment had links to subsequent redundancies.
Late payment also forces many affected businesses to focus on ‘day-to-day’ activities rather than longer-term plans for growth and expansion
Research has shown that the longer companies wait for payment, the lower the level of investment they make and the harder it is for them to access finance.
Other consequences for businesses of late payment highlighted by research include:
- time and resources spent chasing payments
- increased use of borrowing facilities/overdrafts
- impact on their supply chains as they may be required to pay their own suppliers late
- directors and staff salaries being reduced or delayed to try to keep cash in the business
Reporting requirements
Larger organisations are increasingly required to report their performance in paying supplier invoices:
- In the public sector, the Public Contracting Regulations 2015 introduced mandatory reporting; and
- In the private sector, larger businesses are required to report under Section 3 of the Small Business, Enterprise and Employment Act 2015.
Options available
Recent developments in the payments industry present opportunities for the acceleration of payments and reductions in the administration associated with many payment practices.