B2B Payments

UK Reveals Late Payments Law Loophole

The U.K. is perhaps the most vocal market in the late B2B payments world, with regulators working to address delayed invoice payments, while FinTechs and banks weigh in on the matter with their own efforts to tackle the issue. Some, like Xero and FreeAgent, have released research in hopes of raising awareness of the late payments plight.

Others, like NatWest, offer financing solutions to aid small businesses struggling with getting paid late by corporate customers. Last week, the financial institution announced a digital invoice financing service, Rapid Cash, enabling SMBs to access more than $375,000 against their unpaid invoices.

In a statement, Paul Thwaite, NatWest MD head of sales, specialist businesses and business banking, said the solution is “an alternative to a conventional business overdraft.”

Others, however, argue that regulators should take the lead in alleviating the pain of late payments. While the government has arguably heeded that call, concerns are rising over the apparent lack of effect that Duty to Report legislation has had.

Reports in BDaily News last week noted that late payments pressure continues to rise in the U.K., despite the Duty to Report rule that took effect in 2017. Analysts pointed to a loophole in the legislation as the cause. While companies meet certain thresholds for turnover, balance sheet and workforce, their subsidiaries that do not meet those thresholds are not required by law to report their B2B payment practices.

Small Business Commissioner Paul Uppal reportedly said it is “disappointing” that the Duty to Report legislation has not had its intended effect. Meanwhile, MP and Chair of the Commons Business, Energy and Industrial Strategy Committee Rachel Reeves said this loophole “undermines efforts to tackle late payments and protect small businesses.”

Below, PYMNTS looks at some of the latest data on U.K. late payments, and examines the numbers behind the late B2B payments challenge in other markets, too.

37 percent of U.K. SMBs have considered closing their business as a result of late payments, Xero’s latest research found. On average, small firms in the region are owed more than $29,000, and must wait an average of 14 days past due to see their invoices settled. The data represents a 17 percent year-over-year increase in the value of unpaid B2B invoices in the U.K., with nearly half of invoices issued as of February 2018 being paid late, according to reports in Business Matters.

58 percent of U.K. invoices were paid on time last year, new data from FreeAgent revealed, although a closer look at city-specific figures reveals that certain markets are worse for accounts receivable, according to Scotsman reports. Glasgow, Scotland, for instance, sees 49 percent of invoices paid on time, while Edinburgh and Aberdeen reportedly see even fewer on-time payments for B2B bills. According to FreeAgent Chief Executive and Co-founder Ed Molyneux, some of those bills remained unpaid for months — and some were never paid at all.

60-70 suppliers in West Bengal’s entertainment industry threatened to cease work as a result of late payments, according to recent reports from New Kerala. Industry association Cine Video and Stage Supplier Welfare Association (CVSSWA) warned last week that business customers had four days to settle unpaid invoices, or dozens of vendors would halt their operations that supply cameras, lights, vehicles, and other key items for the entertainment sector. One producer, Rana Sarkar, was pointed out as one of the worst offenders of late- or non-payment to more than a dozen vendors. The association said it hoped its action would result in a faster resolution to the problem than the court system, although it noted that it has initiated legal action against industry firms.

85 days is the average time it takes for Romanian companies to pay their B2B invoices, new research from Termene.ro found. Reports in Romania’s Business Review said the 2018 average for Days Payable Outstanding is an improvement upon the 2017 average of 94 days that businesses took to pay invoices. According to the publication, however, the value of outstanding B2B invoices in Romania is on the rise. In 2017, it was valued at more than $83 billion — double the value in 2008. Termene.ro published its research in conjunction with the launch of redBill, a platform that allows companies to make public any outstanding bills their customers have failed to pay.

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Our data and analytics team has developed a number of creative methodologies and frameworks that measure and benchmark the innovation that’s reshaping the payments and commerce ecosystem. The July 2019 Pay Advances: The Gig Economy’s New Normal, a PYMNTS and Mastercard collaboration, examines pay advances – full or partial payments received before an ad hoc job is completed – including how gig workers currently use them and their potential for future adoption.

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