Late payments are a huge problem for businesses, particularly for smaller companies who have limited cash flow. However, according Wax Digital, many businesses are not paying their own suppliers on time, despite demanding fast payments themselves.
Of those taking a stand against late payers, 64% of senior finance managers say they have “sacked” customers for consistent late payments.
Over 200 executives were surveyed at the end of 2017 for Wax Digital. 43% said that late payments were unfortunate and must be avoided. However, 12% justified it by saying that it was “the norm”. A further 18% said it was “out of their control.”
41% of businesses say they have delayed paying wages and 69% admitted that they were frequent late payers. Only 27% say they always pay their own suppliers on time.
Daniel Ball, director at Wax Digital said: “While in some cases 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.”
Similarly, new research from Tungsten Network and the Institute of Finance and Management (IOFM) revealed that half of businesses were paying late also.
47% of businesses admitted that at least one in ten payments to their suppliers was made after the agreed payment terms. Of those, 16% said that a fifth of their payments are never on time. Only 5% of businesses claim to always pay their suppliers by the time promised.
Reasons for late payments
While many businesses admitted to knowing about late payments, the research showed that this was largely unintentional and more down to ineffective processes that could be improved on.
31% said that invoice processing time scales was one of the reasons for late payments. 26% cited internal errors and 29% said that late payments only happened when the purchaser was late notifying finance about what they’d ordered.
Consistent invoicing is extremely important to maintain order and cash flow between businesses. One of the reasons for late payments was poor invoice processing, which is something that can be solved.
If you’re looking for a reliable and efficient way to send invoices, with clear and easy payment methods, cloud accounting software can help. With Pandle, you can send all your invoices through the software and manage transactions alongside. Payments can also be processed easily through Stripe and Paypal which we’ve integrated into the software.
Pandle is free and easy to use, for more information you can take a look at our features here.