Reconciliation Troubles, Supplier Inexperience Exacerbate Late Payments

Late payments are a reflection of a broader challenge in B2B payments: Large corporate buyers can wield their market power with small suppliers that lack leverage to negotiate faster payment terms.

But late payments aren’t the only symptom of unequal B2B relationships.

In Kenya, competition regulators recently warned French grocery and retail giant Carrefour that it faces fines of up to $140 million after the Competition Authority of Kenya discovered that the company, via its franchise holder Majid Al Futtaim (MAF), has been treating suppliers unfairly.

According to reports from The East African, regulators have found that Carrefour imposes unfair contracts on vendors, which forces suppliers to pay fees to have their products stocked in stores. The watchdog gave the retailer 60 days to review its supplier agreements.

While unfair supplier contracts aren’t unheard of, late payments are not necessarily always the result of a corporate buyer abusing its market power. As this week’s B2B Data Digest shows, late payments can also be the result of suppliers’ unfamiliarity with invoicing best practices.

“Pricing structure and cash flow are both key to driving a business forward, and yet for small businesses, many have had no or very little training,” said Sandra Rowley, head of marketing for U.K. accounts receivable and POS solution provider takepayments, according to reports in Thiis last week.

Below, PYMNTS looks at the latest data behind the ongoing fight against late B2B payments.

Forty percent of small businesses that secured a loan used the funding for day-to-day spending, a report from the U.K. Federation of Small Business (FSB) found, according to reports from SME Web. In the context of late payments in the U.K. nearly doubling to more than $29 billion last year, the FSB said small businesses are seeking lending to manage their cash flows disrupted by unpaid invoices. For the small businesses that obtained a loan in the last quarter of 2019, less than one-quarter used the money to invest in new equipment, while even fewer used the loan to expand their business or recruit new talent.

Sixty-three percent of small business owners taught themselves how to manage invoicing and taxes, a new report from the U.K. revealed. Conducted by takepayments Ltd., the survey of 1,000 SMBs suggested that the self-taught method isn’t helping with the U.K.’s late payments problem: 46 percent of respondents said they have to constantly chase down late payments, and more than half agreed that late payments negatively impact cash flow. Forty percent admitted that their knowledge of invoicing is “limited.”

It took 223 days for the Canadian manufacturer Bombardier to pay one of its invoices, according to recent reports. The company’s supplier payment practices led to an investigation by Canada’s small business commissioner after a complaint was logged in regard to Bombardier’s U.K. operations. One of its vendors, Alistair Hugo Catering and Events, accused the company of not paying about $7,300 worth of invoices. The probe uncovered the invoice with a 223 days sales outstanding (DSO), with Bombardier reportedly explaining that the payment delay was the result of being unable to reconcile invoices with purchase orders.

$5.6 million is owed in unpaid invoices by one hospital management company, according to Insurance News Net reports. The company, Americore Holdings, has acquired financially troubled hospitals only to fall into bankruptcy itself, leading to outstanding invoices and suppliers wondering whether they’ll be paid. The Centers for Medicare and Medicaid Services reportedly discovered a list of 117 vendors at one Americore-owned hospital with delinquent accounts totaling more than $5.6 million. “Our business is not a charity, and we are not a bank,” one supplier told the publication.