The Late B2B Payments Blame Game Expands

The late payments fight is a complex one, requiring an understanding of both buyers’ and suppliers’ cash flow needs, their leverage in the market and their understanding of what constitutes responsible and fair payment terms.

In a recent conversation with PYMNTS, Hydr Co-Founder Hector Macandrew specified the importance of understanding the difference between late B2B payments and longer B2B payment terms that allow corporate buyers to still, technically, pay on time — even if that means paying six months after receipt of an invoice.

While the stigma tends to assume that larger corporations abusing their market power are to blame for longer payment terms and late payments to small suppliers, Macandrew noted the reality is a bit more complex.

“They have very complex finance functions, and they simply cannot offer payment terms that are less than 90 days. They need 120 days, or even longer,” but, he added, “they take great pride in the fact that they never pay late. They simply have to ask their suppliers to ensure quite long payment terms.”

This week’s B2B Data Digest looks at the latest in late B2B payments, as well as the practice of strategically timing out supplier payments — for better or for worse — to strengthen cash flow.

29 percent of U.K. finance leaders cannot process an invoice in less than 20 days, new data from accounts payable FinTech Invu revealed. Meanwhile, 6 percent say it takes longer than 30 days, while 7 percent are not able to identify how long it takes. The result, Invu said, is delayed supplier payment practices. While Invu GM and Finance Director Ian Smith noted some organizations have accelerated accounts payable practices to support their small suppliers — he pointed to Morrisons, which unlocked cash reserves to hasten supplier payments — the survey reveals how late payments can often start in the back office at the very beginning of the accounts payable (AP) process.

46 percent of commercial subcontractors say they struggle with cash flow, according to a recent Billd survey, which also found that more than 60 percent of respondents reveal they are often forced to pay their suppliers before they themselves are paid. The results showcase the pressures of B2B payment delays in the construction industry, even at a time of expected growth: Most survey respondents are planning to grow and pursue larger projects, the reports found, with nearly two-thirds noting that their own suppliers have fortunately been flexible with their payment terms. However, not all subcontractors have been so lucky as they run out of trade credit with their vendors: 18 percent told Billd that they have been denied a purchase because of insufficient credit, showcasing the potential consequence of these professionals failing to be paid in a timely manner by their own customers.

73 percent of U.K. procurement professionals said their own late payment practices have damaged supplier relationships, a new survey by Medius and Sapio revealed. The survey asked 200 finance and 200 procurement professionals about their supplier payment practices and discovered that 59 percent of suppliers that had been paid late reduced or halted discounts, while 62 percent said goods or services that were ordered have been withheld until invoices were paid. More than half (55 percent) said a supplier refused to work with them again as a result of those late payments. In the survey, procurement leaders cited a disconnect with finance leaders as a key cause for invoice payment delays, though other factors attributed to payment delays include an arduous vendor onboarding process. “This research clearly shows that late payments are causing significant issues for both procurement and finance, causing the business to lose money and even in some cases causing damage to business reputations,” said Daniel Saraste, senior vice president, Product Strategy at Medius, in a statement.

130 diverse suppliers will be hosted by food retailer Albertsons as the company looks to diversify its supply chain. Trade financing programs will be an important part of that initiative, with Albertsons announcing recently a partnership with C2FO to implement an early supplier payment program. The financing will see Albertsons able to pay diverse suppliers before payment due dates in exchange for a discount, with the company noting that the initiative aims to alleviate cash flow pressures on these smaller firms. “Accelerated payment of receivables is essential for all businesses in need of greater liquidity, but especially for those that may be underrepresented and underfunded in our current financial system,” said Alexander “Sandy” Kemper, founder and CEO of C2FO, in a statement. “We want to position these diverse suppliers for long-term success and can start by offering the working capital needed to grow and stay strong in this difficult economic climate.”