The worst sectors for late payment are named and shamed in new ports. The reports looks at the late payment practices of different business sectors in 2022.
Analysis of payments data provided to the Department for Business, Energy, and Industrial Strategy of the FTSE 100 and 250 by AP automation provider Medius, reveals the three worst industries for late payments in the first half of this year.
BEIS data highlights the percentage of invoices paid late, finding huge variation across the FTSE 100 and 250 indices, with some companies paying 0% of their invoices late, whereas others paid 100% of their invoices late.
Analysis reveals that Food & Tobacco is the worst offender for late payments, with 70% of invoices paid late, followed by Oil & Gas (38%) and Electronics (38%). In fact, Electronics has seen significant regression, with late payments up by 46% from 2021.
Analysing the days it takes to pay suppliers, the beverage industry stands out as the worst offender for this practice, taking an average of 95 days to pay money owed to suppliers, with no progress made to reduce the length of time to pay suppliers from the first half of 2021, when the figure stood at 92 days.
Similarly, across all three of the worst offending industries, no progress has been made to reduce the length of time to pay suppliers. In contrast, Utilities (19 days), Banking (20 days), and Residential (20 days) are the three best industries for late payments, taking on average just 20 days to pay suppliers in the first half of this year.
Paul Ellis, UK Director of Excellence, Medius, says: “Within the current volatile economic climate, it’s never been more important for businesses to control their cash-flow and build high-functioning business relationships and supply chains.
“We know that late payments are a common practice in business, but at times like these – they have an even more damaging impact for business, and especially for SMEs – the lifeblood of the economy.
“Transparency in data and business practices can help tackle the problem. But we still have a long way to go. Clearly, late payment practices are still rampant, and even worse, a significant number of businesses’ aren’t declaring this information- which is vital to build trust, and accountability.”
Since February 2017, the Department for Business, Energy & Industrial Strategy has required large businesses in the UK that have £36m in turnover, £18m on its balance sheet, and/or 250 employees to self-declare this data to provide transparency for suppliers. This has enabled reports to find the worst sectors for late payment.
Although the companies are obliged to submit the data twice a year, that is not always the case, with over 35% of FTSE 100 companies, and 55% of FTSE 250 companies not disclosing their full data set.
The impact of late payments
Medius data reveals the impact of late payments on businesses, and on accounts teams, all of which are exacerbated by current economic headwinds.
Due to late payments over a third of finance professionals in the UK (39%) say that they can’t close their books on time and report that late payments are having a damaging impact on not only supplier relationships, but the external reputation of their businesses too.
Finance professionals also reported that one of the key issues leading to late supplier payments is the relationship between procurement and finance teams. In the UK, 72% of respondents stated that they either didn’t work with procurement at all (32%) or only occasionally worked with procurement (40%). When they do work together, 51% of respondents in the UK claim they are not satisfied with cooperation.
A bad working relationship was reported to lead to missed opportunities for supplier discounts, increased errors and time spent managing payments, as well as a lack of transparency and oversight for finance teams.
Amanda Walls, Director, Cedarwood Digital said: “For small businesses late payments is a serious problem. It’s not just about financial stability, but about being able to plan, knowing when money comes in to pay our fixed monthly costs, like rent and salaries.
“Late payments are rife and the issue of non-payment is extremely costly and time-consuming for businesses like my own. There needs to be more protection in place for small businesses who fall victim to late payers, and more transparency and data available on businesses of all sizes who regularly pay late, or worse, not at all.”