The Late-Payment Plague Is Getting Worse

Innovators are offering new ways to facilitate payments between buyers and suppliers, and regulators in the U.S. and EU have zeroed in on the issue of late B2B payments. Still, they seem to be fighting an uphill battle – complaints are streaming in of major corporations taking months to pay their suppliers.

Late payments between buyers and suppliers are an epidemic, Cash & Treasury Management File reports. EU-based credit management leader Intrum Justitia released its annual survey of 10,000 businesses last May, finding that in more than half of the 31 nations surveyed, late payments have either caused loss of income to stay the same or worsen for suppliers. Half of respondents, the survey found, reported that late- and non-payments have stifled the growth of their firm in the past year.

Despite a lack of improvement on the issue of late payments, regulators aren’t ignoring the matter. The U.S. Federal Reserve recently pushed for new B2B payments technological innovation after declaring the nation’s payments industry as inadequate to support faster payments. The 2011 EU Directive – which has been adopted by 27 of the EU’s 28 member states – bans payment terms longer than 60 days for private sector firms and 30 days for public sector firms.

But U.K. businesses say those rules are ignored. The Institute of Directors, made up of 40,000 business directors, warned merchants that late payments are crippling the U.K.’s economic recovery after a supplier for beverage giant AB InBev complained that the company took up to four months to pay up.

According to The Telegraph, competing beverage conglomerate Diageo warned its suppliers that it would take up to three months to settle their invoices; according to a letter obtained by the Forum of Private Business, Diageo has told its suppliers that beginning on Feb. 1, it will extend its payments deadlines from 60 days to 90 days on all new contracts.

Reports also emerged in recent weeks that ketchup maker Heinz told suppliers that it may take up to 97 days to pay instead of 45, though Heinz did not comment on the allegations.

Late payments are causing major corporations to borrow from small- and medium-sized enterprises, reports say; a report from Bacs Payment Schemes found that U.K. suppliers alone were owed nearly $60 billion last year. And while companies like Tungsten and C2FO are offering platforms that facilitate early payment discounts to buyers, some buyers, like France’s EDF, have refused to extend their payment terms. Still, according to the most recent surveys, the situation is worsening, or – at best – not improving.