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Late payments: Buyers leave SME suppliers last

Recent research by Previse shows that businesses pay their smallest suppliers 30 days later than their bigger suppliers(1). It shows the extent to which the problem of slow payments is concentrated among small suppliers. Sadly most reporting fails to highlight this problem.

Previse research was based on an analysis of over 10 million invoices (representing more than £24 billions of spending by some of the UK’s largest buyers). It showed that

  • late payments are rife throughout the supply chain
  • smallest suppliers are paid 30 days late
  • firms charging the biggest fees are paid, on average, less than a day late.

The research also showed that:

  • suppliers invoicing for a value less than £10,000 p.a. are not even processed by buyers until 35 days after being received on average, ensuring that payment, usually due within 30 days, is late before the invoice has even been approved
  • large suppliers have their invoices prioritised, taking just 3 days to be processed, while also being paid faster after being approved. 

Current reporting not showing how SMEs are treated 

Large firms in the UK are now required to publish official statistics on how quickly they pay suppliers. However, the reporting does not require them to provide separate figures for SME suppliers. This means that, while the average time it takes to pay an invoice is 37 days(2), it is likely that the situation for SMEs – those suppliers most in need of fast payment – is far worse.

New reporting system required

Slow business to business payments caused by inefficient payment terms cost the world’s economy almost £250 billion every year(3). They cripple businesses and economic growth and are one of the leading killers of small suppliers(4). Paying slowly also costs large buyers, because a supplier’s expensive cost of borrowing is priced into the cost of the goods or services supplied.

 Previse calls for the Government to require companies to report specifically on their treatment of SME suppliers to ensure that they are properly protected.

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1 – Data collected between 2017 and 2019 from 10,868,698 actual invoices analysed by Previse, representing £24.6 billion of spending by large corporations

2 – Taken from an analysis of Prompt Payment Reports published up to 8th October 2019

3 – Based on Previse’s estimates: US$15 trillion unserved trade credit market, costing SME suppliers 3% financing margin per annum (US$225 billion) and large suppliers 1% financing margin per annum (US$75 billion). This totals US$300 billion per annum (£246 billion).

4 – European Commission – Economic Impact of Late Payments, 2014


CTMfile take: Late payments continue to be a major cancer in business today.

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This item appears in the following sections:
Procure-to-Pay Cycle in WCM
Accounts Payable Management

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