Almost one in two business owners have admitted to paying suppliers later than the agreed terms, new survey findings have shown.
According to research from e-invoicing firm Tungsten Network and the Institute of Finance and Management (IOFM), 47 per cent of businessesfail tofulfilat least one in ten of their supplier payments after the agreed date typically between 30 and 60 days.
Additionally, justfive per cent of companies paid all invoices on time, whileone in 12 were failing to monitor supply chain practices altogether.
Britain’s late payment problem has emerged as one of the biggest constraintsof small business growth in recent years. The Federation of Small Businesses (FSB) predicted that if small companies received every payment on time in 2016, profit growth for each firm would be on average 2.6 per cent higher representing an extra 4.8bn in economic value.
The latest research arrives as the Department for Business, Energy and Industrial Strategy (BEIS) introduces payment reporting legislation for large businesses guilty of so-called ‘supply chain bullying, while the government’s small business commissioner was appointed inoctoberwith a mandate to address the problem.
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Researchers also asked businesses why they were failing to pay suppliers on time, and identified the five most common causes of late supplier payments:
Slow internal processes (64 per cent)
Lack of automation (39 per cent)
Administrative errors (27 per cent)
Team capacity to manage the volume (20 per cent)
Managing cash flow (16 per cent)
Commenting on the findings, Richard Hurwitz, CEO of Tungsten Network, acknowledged the economic impact of paying suppliers late, but said chasing invoices was a ‘source of frustration for suppliers and buyers alike.
there is a common misconception that these late payments are solely as a result of managing working capital or businesses holding onto their funds for as long as possible, he added
our research shows that when it comes to late payments, clunky internal processes and slow paper-based systems are the predominant causes, leading to friction in the supply chain.
businesses ultimately need to get paid in order to invest in more work. Late payment impacts working capital and economic production. Arranging invoice payments can be a complex task, particularly if it’s cross-border and involves ensuring compliance with local tax laws. Businesses should feel supported, not pressured, in ensuring that their suppliers can be paid on time.”