It is very important to distinguish between “late payments” and “long payment terms”. Late payments occur when the buyer pays later than required by their agreement with the supplier. This is a much bigger problem than long payment terms because it creates cash flow uncertainty which threatens a supplier’s viability.

Long payment terms are the result of a commercial agreement between buyer and supplier. They are manageable through multiple receivables financing options which convert an existential issue like cash flow into a cost issue. If small suppliers with long payment terms have access to a solution like Supply Chain Finance they can actually improve their cash flow and reduce costs even with long payment terms.

Large corporates, driven by investor demands, will continue to focus on asset efficiency and operating cash flow which in turn drives longer payment terms. Fortunately, innovations in Supply Chain Finance can turn this into a benefit for small suppliers by improving their cash flow, reducing costs and providing greater payments visibility.