In B2B payments, terms range from those that exceed the comfort levels of businesses to those that are unusually prompt.
This week’s B2B Data Digest highlights one organization’s 15-day payment terms for some suppliers along with research that highlights the prevalence of late payments challenges.
50,000 is the approximate number of small businesses that shutter per year due to late payments, with the total owed last year at approximately $30 billion, according to research from the U.K.’s Federation of Small Businesses. Those numbers have reportedly only gotten worse amid the pandemic as bigger firms skimp on payments to attempt to conserve funds. Even though small- to medium-sized businesses (SMBs) can charge interest on payments, few have the desire to as they are worried about losing contracts with larger firms. However, big British companies could encounter penalties or fines if they don’t provide payment to smaller suppliers on schedule with new rules under consideration by the government.
About 80 percent is the share of companies that indicate they have taken lengthier payment terms than which they were comfortable with and almost half did so to steer clear of bankruptcy, Credit Strategy reported, citing Intrum’s European Payment Report. Furthermore, approximately 46 percent of British companies foresee that the risk from debtors will increase during the 12 months to come. “Late payment is threatening the survival of the U.K.’s businesses,” Intrum U.K. Managing Director Eddie Nott said, per the report. “Lengthening payment terms, default and rising arrears mean firms must dedicate more time and resources to getting paid.”
$16 billion is the minimum amount that strong European and American fashion firms have declined to pay international vendors for merchandise as of the coronavirus’s outbreak, The Guardian reported. The Worker Rights Consortium (WRC) and the Center for Global Workers’ Rights (CGWR) harnessed databases to determine that vendors and clothing manufacturing facilities globally lost a minimum of $16.2 billion in revenue in a period spanning from April to June as brands called off orders or wouldn’t provide payments for attire orders they had made pre-pandemic.
15 days is the maximum time in which payments to Certified Small Business Enterprises (SBEs) will take under a new Santa Clara Valley Transportation Authority (VTA) policy, according to a press release. The procedure will make payments to Certified SBEs twice as quickly as the standard process of 30 days, while discounts will not be deducted from payments unless they are negotiated in the contracts ahead of time. “At a time when cash flow is critical to the very survival of small businesses, we hope that this new policy to expedite payments will help support our economy through these difficult times and beyond,” the authority said in the press release. The agency said it is among the first significant transit agencies in the country to put such a policy into place.
4.61 percent is the proportion of companies with outstanding payments of more than 90 days in the United Kingdom, the Financial Times reported, citing Dun & Bradstreet. The consulting firm also noted that average payment terms are different throughout the globe. Its 2019 annual report determined that 53.8 percent of bills were paid on schedule in Thailand, while only 1.1 percent were not paid for a minimum of 90 days. Those numbers were 16 percent and 11.6 percent in Portugal, however. Furthermore, a 2018 study by the European Union’s executive body determined that under 40 percent of companies received payment on schedule.