In a recent interview with PYMNTS, Chad Hardy, chief operations officer at Australian FinTech Bookipi, offered insight into the global late payments problem. While the conversation often focuses on the impact of large corporates deliberately delaying payment to small suppliers, Hardy noted that often, the culprit behind late B2B payments is simply human error.
“Most people don’t intentionally avoid paying invoices,” he said, pointing out that mistakes in invoice and payment data, or even forgotten bills, are often to blame.
This week’s B2B Data Digest looks at the latest stats behind the late B2B payments challenge, finding that payment delays continue to be commonplace, with particular pain felt among small businesses. Plus, a look at how Paper Source’s bankruptcy filing has caught small, women-owned businesses in invoice payment uncertainty.
4 supply chain finance funds have been frozen by Credit Suisse, Reuters recently reported, with the financial institution grappling from the ongoing fallout of the Greensill Capital collapse. According to the publication, the lender was a key source of funding for Greensill, and its demise has led Credit Suisse to freeze funds within its asset management unit that had been invested in supply chain finance. The ongoing saga continues to raise concerns about the trade finance space and the security of financing strategies that aim to mitigate the cash flow pains of delayed and late payments for B2B traders.
15.6 days past-due is the average length of time it takes U.S. corporates with more than 500 employees to pay their vendors, according to USA Today data released last year. The statistic was cited by Gene Marks in a new piece for The Guardian highlighting the ongoing challenge of late payments in the U.S. The “corporate sin” of delaying payment to small suppliers, as he described it, continues to create disproportionate cash flow pressure on smaller companies, with Marks highlighting the challenge of small and medium-sized business (SMB) vendors unable to negotiate with their largest customers. The U.S. corporate community should look toward the U.K. and its Prompt Payment Code for guidance on the importance of timely payments to B2B suppliers, he said, noting that discussions in the U.S. about the federal minimum wage should also expand to include encouraging large corporates to not only pay their workers fairly, but pay their suppliers fairly, too.
28-day payment terms are the average for businesses without automated accounts receivable processes, according to a new report from PYMNTS. The March 2021 B2B Payments Innovation Readiness Playbook: The Impact of Automated AR Processes on Collection Cycles, a collaboration with American Express, found businesses that lack AR automation technology wait nearly 18 percent longer to get paid compared to those that do. The research found that suppliers that automate credit checks offer 13 percent shorter payment terms, while manual credit checks are attributed to delayed payments and longer days sales outstanding (DSO). “Investing in automated tools is beneficial for firms in the long run, as it can shorten their overall payment cycles and allow them to get a better handle on their cash flows,” the report concluded.
81 percent of businesses surveyed by BlueSnap agree that their companies are at risk as a result of cash flow challenges linked to late payments. The company recently released its BlueSnap Progressing Payments Report, which found more than one-quarter of surveyed firms’ customers exceed payment terms. As much as 30 percent of monthly revenue can be stuck in accounts receivable, and researchers are pointing to a lack of AR automation as a key factor behind this challenge. The report found that faxes, physical mail, paper invoices and checks — as well as cash — remain commonplace, and can slow down payment cycles.
1,200 vendors of bankrupt Paper Source are facing tens of thousands of dollars in unpaid invoices, according to The Baltimore Sun reports. With the defunct retailer having filed for Chapter 11 bankruptcy protection, vendors — largely small, women-owned companies producing stationary, cards and gifts — are unclear about whether their unpaid bills will ever be settled. One business owner, Lisa Krowinski, founder of Sapling Press, told the publication she is owed more than $20,000 for products procured by Paper Source in January and February. In a statement, she said, “As a community, we feel that we’ve been taken advantage of in a way that no small business should have been, especially coming off a pandemic.” Some suppliers said that as Paper Source was gearing up for its filing, it placed more orders and even pushed to expedite delivery. Reports said the company is reportedly planning a webinar to discuss the matter with its suppliers and the creation of a critical vendor fund, which would prioritize payments to vendors that had sent goods 20 days before the filing.