Studies have found that a number of businesses in the UK with regards to late payments are working under double standards.
Companies who are insisting payments on time from their customers are not committing to this when paying their own suppliers. With many businesses being part of a supply chain and transactions being interconnected, once a supplier is not paid, they are unable to pay customers. This cycle will affect more than one business.
In 2017, on the behalf of Wax Digital, Sapio questioned 200 executives independently regarding late payments. Whilst 43% believed late payments were unfortunate and should be avoided, 12% said it was “normal”, and 18% stated it was “out of their control”.
The studies illustrated that 31% claimed the timescales for invoicing processes was a reason for late payments, 26% blamed it on internal errors and 29% said it was because the purchaser was late notifying finance about what they had bought. This showed that late invoice payments are not intentional but due to inefficient processes that could be improved.
Often the quality and accuracy of the suppliers invoices also delays payments with 26% paying late because of supplier errors, such as inaccurate wording, missing purchase orders or incorrect values on invoices.
Online systems such as eInvoicing are becoming increasingly popular solution for these issues, with 97% stating they would use this system if supplied by their customers.
For businesses to maintain cash flow and supply base it is essential for invoicing processes to be effective and consistent. 88% said being paid without financial errors contributed to a good working relationship, followed by on-time payment for 86%.
Daniel Ball, director at Wax Digital, said “While in some cases a late payment is an unfortunate vicious circle caused by businesses simply not sticking to the terms of their contract, there are many times when it is simply the result of inefficiency. Poor invoicing processes don’t just mean delays with money changing hands; they can also mean an end to carefully sourced supplier relationships, and reputation, costing the business much more in many different ways. But they are very simple to solve, through the adoption of eInvoicing processes.”