Organizations Strategize Supplier Payments To Boost Cash Positions

Across industries and across the globe, industry experts continue to raise concerns about shifting B2B payment habits — often to the detriment of small vendors. But some analysis suggests supplier payment strategies are in flux to better support the working capital positions of corporates.

Despite widespread disruption in global supply chains, a new report from Medius indicates that supplier invoice and payment volumes have actually remained relatively stable this year compared to last. What has changed, the company warned, is average days payable outstanding. While the company did not release specific metrics, it did note that companies have significantly changed their vendor payment habits — either to accelerate or decelerate payments.

“The stability in invoice volumes and transaction volumes suggest that our customers are managing their businesses during the current situation without major disruption,” Medius CEO Per Åkerberg said in a statement.

Yet changes to days payable outstanding (DPO) may suggest that for the vendors of these companies, it’s not business as usual. The report found that firms with tighter cash availability have lengthened their average DPO, though organizations with stronger cash flow are actually accelerating vendor payments, in part to capture early payment discounts.

Separate analysis from The Hackett Group found that as businesses adjust their supplier payment terms, they’re relying less on external financing tools like supply chain financing, and more on invoice payment optimization, to improve their cash positions.

Below, PYMNTS rounds up the latest data on late B2B payments.

52 percent of firms across Asia are struggling with late payments, recent research from Atradius revealed. Its annual Payment Practices Barometer report found that across Asia, organizations are taking longer to pay their B2B invoices. Analysis of more than 1,400 companies in the region found a whopping 40 percent increase in the portion of businesses that are being paid late, compared to 2019 research. The United Arab Emirates saw the largest increase in overdue invoices, the report revealed.

59-day-payment terms are the mean for invoices financed by Oarex this year, an increase from 49 days last year, the company said. The invoice factoring company released new stats on outstanding receivables in the digital media industry that need financing, noting that so far this year, invoices are paid an average of nine days late. That’s compared to 2017 figures, during which invoices were paid on time. Looking ahead, Oarex forecast that digital media companies will see their average payment terms increase t0 64 days next year if current trends continue. In a statement, Oarex CEO Hanna Kassis said a combination of industry professionals continuing to work from home, mixed with credit crunches, is likely to blame for the longer payment terms, reports in Digiday said.

90-day payment terms may not be long enough for Akamai Technologies, recent reports in The Wall Street Journal said. The cybersecurity company is closely monitoring its accounts receivable (AR) performance as corporate clients request longer payment terms, which have been extended to 90 days for some customers. For others, Akamai said it agreed to restructure existing contracts. But according to the firm, some clients may not meet that 90-day deadline. As a result, the company said it is wielding real-time data on customers to optimize AR and collections strategies. The firm’s net accounts receivable increased by 16 percent year-over-year for the quarter ended March 31, according to the publication.

$65 billion is needed in order for Australia’s largest firms to pay suppliers within 30 days, according to supply chain financing company Greensill. The firm released the statistic in response to calls from Australia regulators for the largest organizations to adhere to 30-day supplier payment terms as late payments in the country continue to plague smaller companies. Yet according to Greensill, those organizations would need access to billions of dollars worth of working capital in order to finance those accelerated payments — an estimate that Kate Carnell, Australia small business ombudsman, described as “stupid.”

$1.3 trillion worth of working capital could be optimized through supplier payment practices, according to recent analysis by The Hackett Group of the top 1,000 non-financial U.S. companies. Hackett surveyed the companies to assess their vendor payment practices, finding that the top-performing businesses are both collecting payments from their customers more quickly, and delaying payments to their own vendors to optimize working capital. The analysis suggests businesses are adjusting their strategies to optimize working capital via AP operations, focusing on payment strategies rather than relying on external supply chain financing to improve their cash positions, Hackett said.