B2B Payments

Past Due Time to Look at Late B2B Payments

MarketInvoice has identified the nations and the industries that are most chronically late in paying suppliers, which has a ripple effect on cash from beginning to end, says Paul Crayston, head of communications for the firm.

In an interview with PYMNTS, Paul Crayston, who heads MarketInvoice’s communications operations, said that the fact that 70 percent of invoices are paid late “is more cockup than conspiracy. It’s not really some sort of a dastardly plan by companies …but one of the real reasons this is taking place is that there just really, in many cases, is no incentive for companies to pay on time.”

MarketInvoice, which makes its bread and butter by lending on outstanding invoices (collecting a small fee on each), compiled research that spanned more than 30,000 invoices and 1,000 firms. In the data itself, MarketInvoice found that the country where invoices are paid least on time (as measured in days) is Australia, where payments are made, on average, 26 days after a due date.

Interestingly, the United States falls under the 70 percent global average, with about half of invoices remitted in a tardy manner. And Europe, excluding the United Kingdom, is even better than that hurdle, with roughly 40 percent of invoices coming in paid after stated deadlines. But throw the Brits and the French in, and then the whole region gets skewed downward, because roughly two-thirds of U.K. firms pay late and French firms pay, on average, about three quarters of their bills late. C’est la vie.

Of course, there are firms and regions that actually operate on the flip side of all this, with Japan paying six days early, as one notable example.

If you’re inclined to think cultural differences may make a difference, you may be right, but Crayston was quick to note that, in some cases, where, for example, in Japan, there is a firm sense of honoring contracts, “in this case, there’s also an economic reason to pay early, too. That’s because of negative interest rates,” where keeping cash on the books actually costs a firm money.

What is to be made of the fact that SMEs and big “blue chip” firms have roughly the same rates of late payment, at 61 percent and 62 percent, respectively? The slightly worse average for bigger firms, said Crayston, shows that bigger firms may be operating in far-flung territories across a supply chain or departments. But it is the SME, said the executive (who added that these firms’ average reflects that they, as a group, pay “either very late or very early”), that has a “knock-on effect up and down the supply chain,” with smaller players impacted, as they may provide only a limited range of goods and services to a limited range of customers.

In fact, he added, some initiatives at the government level to reduce late payments may not have the effects that are initially anticipated. Consider the thought of smaller suppliers naming bigger customers to the government as being consistently late. “If you are a small graphic designer,” he said, it’s unlikely such small players would go up against, say, a supermarket firm that “could be as much as 60 percent of your revenues.” There must be sharp distinctions made, said Crayston, regarding longer-term payment agreements, which can extend across several months.

But there are other means to help the problem of late payments, he added. Among them? Technology and, specifically, invoice financing, which has been well-accepted in the U.K. thus far but has room to grow, and in the United States, where there is potential as well. The latter country’s traditional route has been to go to banks, where there are dozens of fees tied to financing and collateral is increasingly difficult to come by with firms that are increasingly service-oriented.

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