New report also uncovers ‘significant’ payment challenges in one in five companies
A significant majority (60 percent) of businesses within the UK are struggling to pay suppliers within agreed payment times, according to new research, while one in five have described the issue as a “significant problem”.
And it is large businesses which are facing the biggest challenge on supplier payments, with 64 percent of finance decision makers within these companies reporting problems with paying on time, compared to 57 percent of medium sized companies.
The “Changing trends in the purchasing processes of UK businesses” report, commissioned by accounts payable and purchasing solutions provider Invu, has revealed a significant problem amongst UK businesses when it comes to payments.
It has however, revealed a declining trend of late payments compared to similar research commissioned in 2016, when 83 percent of businesses reported issues with late payments.
These latest findings come after separate research by The Prompt Payment Directory on the UK business community revealed that half (50 percent) of SME owners admitted to being placed ‘on a knife edge’ while waiting for payments to be finalised.
It also comes months after the Government introduced new Payment Practice Regulations, which require large businesses to publicly report their payment practices.
Commenting on the report’s findings Ian Smith, GM and Finance Director at Invu, said: “The collapse of Carillion at the start of the year showed what can happen when businesses fail to understand their payment commitments, so it is concerning to find that so many businesses – of all sizes – are struggling to pay suppliers within agreed times.
“The big question to come from this research is whether businesses are using their suppliers to fund them, or if they are genuinely struggling with outdated business processes which are causing continuous delays in payments.
“If it is the latter, it suggests that too many businesses do not have a grasp of how dangerous the situation can get for them and they should take Carillion’s demise as a warning of what can happen if accounts payable get out of control.”
He added: “Businesses have a responsibility to meet their payment commitments and should invest in their finance departments to ensure that accounts payable teams are equipped with the appropriate systems and processes to avoid late payments.”