It’s time to confront Britain’s late payments culture
Ahead of the Chancellor’s Budget, Dafydd Llewellyn, MD of UK SMB at Concur, calls on British businesses to tackle the late payments crisis, allowing companies to thrive in the digtial economy, free from cashflow concerns.
In increasingly uncertain times, with digital transformation shaking up markets, it’s paramount that businesses manage payments between suppliers and customers, seamlessly. That’s because trust must underpin every aspect of a truly digital economy, whether that’s enforcing high standards of data security, adhering to corporate responsibility or meeting invoice obligations on time, as agreed.
There are also many other serious reasons why getting payment processes right is paramount.
At the heart of Britain’s economic engine are the small and medium sized businesses that are constantly innovating and creating jobs.
Yet it is these companies that contribute so much to UK PLC that are hit the hardest when invoice deadlines are missed.
This issue needs to be confronted. As we approach the Chancellor’s Autumn Budget on 22nd November, businesses should be thinking about how to improve payment processes as a priority.
In our recently published report into this growing crisis, entitled Invoice Utopia – A Vision of the Future for UK Businesses, we interviewed over one thousand companies about the issues they face due to poor payment processes.
The rationale behind our research is to put forward a vision for a time when payment deadlines are met, efficiently, without delay. This in turn provides businesses with increased confidence to hire new staff, invest, innovate and grow.
Unfortunately the gap between this vision and current reality is significant, as our research found that delayed payments are a major problem for British businesses.
The findings of the report make worrying reading.
21 per cent of medium sized companies told us that they would stop planned investment if their biggest customer failed to pay a substantial invoice within 90 days. That’s a direct impact on key operations like IT, infrastructure and business development, all of which are critical to future growth.
The impact on workers was even more profound. 14 per cent of companies said that they would not even be able to pay salaries, if invoice deadlines were missed. 11 per cent even said they would be forced to make redundancies, driving up unemployment.
One of the key trends our research identified was that late payment of critical invoices was increasingly becoming normalised. Looking across all businesses, 40 per cent told us they had received a late payment in the last month alone. This, in itself is a cause for serious concern, when you consider that 57,960 businesses each year which is 23 per cent of the total number of failed businesses, is directly caused by late payments.
Companies are also keen for government protection against late payments. With Brexit approaching, 86 per cent of respondents said they wanted to see the same amount (59 per cent) or greater protection (27 per cent) through legislation for businesses affected by late payments. It doesn’t have to be this way.
There are three key steps that companies can take to tackle this problem and move things in the right direction. With the right mix of people, processes and technology, companies can transform payment systems for the long term. Firstly, companies must recognise that late payments should never become ‘the norm’ within an organisation.
Few businesses would allow staff salaries to be paid late and those that did would struggle to survive. So why is there a different rule for paying customers and suppliers? That’s why it’s critical that businesses review and implement new processes for managing payments to ensure obligations for payment are met.
Secondly, there is a wealth of software and systems available to ensure payment errors are minimised. With the right digital technology in place, any potential processing errors can be identified and resolved before a payment is missed.
Thirdly, companies need to recognise that establishing trust with customers and suppliers is critical in order to thrive in the digital economy. Each year, almost 60,000 businesses and more than 350,000 jobs are lost as a direct result of late payments, and in taxation alone, the exchequer is denied more than half a billion annually.
Sitting back and making do with the status quo is no longer acceptable. Organisations which oversee a late payment culture risk becoming isolated and suffering long term reputational damage.
Companies that fail to tackle the late payments culture will struggle to thrive in the highly competitive, and increasingly connected digital economy.
With this in mind, working towards achieving an Invoice Utopia is something every business should embrace as a matter of urgency, for the benefit of industry, the economy and wider society.
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