Late payments are often considered a cash flow killer for small- to medium-sized business (SMB) suppliers. Amid the coronavirus crisis, more large corporates are looking to extend working capital by implementing longer payment terms to their vendors, and sometimes withholding pay past invoice due dates.
In an interview with PYMNTS, Supplier Success Founder and CEO Louis Green acknowledged the impact that late payments have on SMBs, particularly minority-owned businesses, in the U.S. — and he highlighted the opportunity that financing programs have to address this financial pain point for SMBs.
“It shouldn’t be about stretching the terms with a small company with $300,000 in annual revenue to make a couple of extra bucks,” he said. “People are rethinking that now, and there are ways for large corporations to manage working capital without doing it on the backs of smaller companies in a way that works for all.”
But late payments don’t just negatively impact the supplier; they can also be damaging for the corporate buyer withholding payment. This week’s B2B Data Digest looks at the latest in late payments, with more organizations finding the risk in late payments — and the value in strengthening their own supply chains.
Five-day payment terms are in place by Aldi in Ireland, the grocery conglomerate revealed. The fast-tracked supplier payment terms will apply to vendors that transact up to 1 million euros (about $1.2 million) a year with the company, which includes more than 200 Ireland-based food and drink vendors, FFT reported. In a statement, Aine Faughnan, managing director at Aldi supplier Dromod Boxty, said, “Cash flow is so important right now for small businesses, so schemes like this really make a huge difference.”
Suspended operations are highlighting the issue of late payments at SsangYong Motor, Just Auto reported. The South Korean automaker is planning additional shutdowns at one of its local plants as a result of a lack of materials provided by a vendor. The report stated the company’s suppliers have refused to deliver parts because SsangYong has failed to pay invoices on time.
33 percent of West Australian SMBs reported revenue losses in 2020, the Bankwest Curtin Economic Centre (BCDC) reported. According to the Australian Associated Press, late payments are placing greater pressure on SMBs’ cash flow across the region. BCEC Director Alan Duncan said in the report nearly one-quarter of SMBs surveyed said they have experienced receiving payment from a large corporate customer that was at least 30 days past due. “This report calls for action to address the ongoing issue of late payments for WA [West Australia] small business owners who have already experienced a challenging 12 months due to the COVID-19 pandemic,” Duncan stated in the report. “Mandated payment terms should be considered to improve this issue and increase the success of WA’s small business operators.”
86 percent of garment manufacturing industry companies are experiencing decreased B2B orders, according to data from Sedex, which explores the impact of the ongoing pandemic on suppliers across a variety of industries. As the most intensely impacted, the garment manufacturing sector is exploring new strategies to remain financial healthy, including experimenting with adjusting payment terms that better favor their corporate customers. Not all suppliers are struggling, however. According to the data, the food and drink manufacturing space has actually seen an uptick in demand from their business customers. In a statement, Sedex Head of Improvement Alexia Ward said, “It is important that companies understand how their suppliers and workers are affected, so they can mitigate negative impacts where possible and help to enable recovery.”