If the answer is yes, then you’re not the only one! Almost half (47 per cent) of businesses admit that at least one in 10 payments to their suppliers are made after their agreed payment terms – typically 30 to 60 days.
Believe it or not a lack of cash flow is not the cause. The Friction Index research has shown that internal processes and a lack of automation are the most common reasons behind late payments to suppliers. Of those companies that admitted making late payments, 16 per cent of said that a fifth are never on time and only five per cent claimed to consistently pay their suppliers within the agreed time-frame. In addition, one in 12 businesses asked admitted failing to monitor their payment practices altogether.
Administrative errors were said to be causing a problem for 27 per cent of businesses followed by their team’s capacity to manage volume (20 per cent). Managing cash flow was stopping 16 per cent from paying suppliers on time.
Tungsten Network and the Institute of Finance and Management (IOFM) were behind the research.
Richard Hurwitz, Tungsten Network’s CEO, said:
“Late payments impact economic growth. Chasing payments is a source of frustration for suppliers and buyers alike.
“However, 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. 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.
“Identifying instances of friction within the procure-to-pay work stream is the first step towards removing them and in many cases, technology can do away with these cumbersome and menial tasks taking up precious time and instead boost productivity and efficiency.”