Half of firms reveal they pay suppliers late
Slow internal processes and poor automation practices are two major factors behind the late payment culture that exists in the UK, new research has found.
The Friction Index from Tungsten Network and the Institute of Finance and Management (IOFM) revealed that 47% of businesses make one in ten payments to suppliers after their agreed terms.
These were typically between 30 and 60 days, meaning many businesses are kept waiting a considerable time for payments they are owed.
Of those businesses, 16% said that around one in five payments is never on time, while only 5% of firms claim to pay on time as promised.
Perhaps of most concern though, is the fact that one in 12 firms say they do not monitor their payment practices at all.
UK legislation, introduced in April this year, means that companies need to report on their payment policies and practices twice yearly.
For companies with a financial year-end in April, some aspects of their processes will need to be reported by the end of November.
Of the challenges firms face when it comes to paying suppliers on time, slow internal processes and a lack of automation, named by 64% and 39% of firms respectively, top the pile.
Other barriers include administrative errors and having the capacity to manage volumes, deemed to be challenges by 27% and 20% of firms.
All of these factors were seen as greater challenges than managing cash flow, which was named by around one in six firms.
Businesses facing difficulties should seek advice at the earliest opportunity as it will increase the number of solutions open to them.
Based on the outcomes of the latest research, businesses may also want to look at their own processes to see if they can be improved, streamlined or made more efficient.
This may help to cut issues in the supply chain and should ultimately mean that businesses have more funding to invest in more work.
By Phil Smith