Late business-to-business (B2B) payments are the bane of any accounts receivable (AR) department. The headaches caused by late B2B payments affect more than just the accountants, as the entire firm relies on incoming payments to remain solvent. Any delay can have momentous downstream ramifications regarding cash flow — including but not limited to late payroll or vendor payments.
Not every industry experiences these problems equally, with days sales outstanding (DSO) — the average number of days it takes a company to obtain payment for a sale — serving as a useful metric for measuring the severity of the issue. For example, industries such as retail have relatively low, or good, DSO, while others, such as healthcare, exhibit much higher numbers. Sectors like construction, however, can have DSO figures that are nothing short of astronomical.
This edition of the “Working Capital Tracker®” examines the state of B2B payments in the construction, healthcare and retail sectors and how real-time rails and automated claims management can help firms improve their prospects of getting paid on time.
Retail receives notably fewer late payments than other sectors, boasting an average DSO of just three to seven days. However, there is always room for improvement, and some retailers are seeking to accelerate B2B transactions with real-time payments. In fact, 85% of large retailers seek partnerships with FinTechs for real-time transactions. In addition, 81% say that real-time B2B payments are critical to their operations, as they can accelerate cash flow, improve supplier relations and reduce administrative burdens on AR teams. Another commonly cited benefit of real-time payments is the reduction in B2B payment fraud, with 61% of large retailers saying these real-time solutions will improve their security situation.
In a recent survey, more than 37% of healthcare providers reported that health insurers owe them sums ranging from $25,000 to $100,000. Another 32% reported outstanding amounts exceeding $100,000. These late payments could significantly impact the bottom line of even the largest practices. The backlog of unpaid insurance claims stems from various sources, including payers requiring detailed documentation to determine whether insurers should reimburse for services or those saying they have already paid.
As post-pandemic demand for new building projects rises, late B2B payments are an endemic problem in the sector. While 87% of businesses in a recent study reported experiencing late vendor payments, 100% of construction firms reported these delays. Alongside marketing and advertising, the construction vertical was the most likely to encounter late payments, with 27% of construction firms saying they typically received payments between 31 and 60 days past the due dates. Consequently, these delays burden AR teams, who must resolve the ensuing cash flow issues.
This edition of the “Working Capital Tracker®,” a collaboration with Billtrust, examines the state of B2B payments in the construction, healthcare and retail sectors and how strategies such as real-time rails and automated claims management can help firms in these industries improve their prospects of getting paid on time.
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