The latest Payment Practices Barometer from Atradius showed that British businesses appear to be performing better than those across Western Europe when it comes to settling invoices on time. The report shows that the average payment term set by companies in Britain for their B2B customers is 25.3 days, which is far less than the 38-day average set by Western European firms.
Typically only 28.7% of invoices issued by British businesses to domestic customers are paid after the due date. By comparison, Western European companies settle 30.6% of invoices from domestic customers late.
British firms are also doing better on average day sales outstanding at 27.4 days compared to 51.4 days in Western Europe.
Late payments are rising
The research, conducted among members of the Institute of Credit Management (ICM) by business information provider, Equifax, reveals that nearly 50% of businesses have seen late payments rise this year, with 58% chasing payments quicker than they were 12 to 18 months ago. Both organisations are concerned that the continued growth in late payments is actually putting pressure on businesses that pay on time.
"Clearly chasing for payments earlier is important to protect a business's cash flow, particularly where a pattern of late payment emerges among a number of customers," said Mark Nuttall, director, Equifax commercial and small and medium-sized enterprise (SME). "With the delaying of payment becoming increasingly the 'norm', credit management departments are chasing payments across the board quicker. Forty percent of respondents to our research said they chase invoices before they become due. And while this doesn't necessarily mean customers have to pay early, we're concerned that businesses are withdrawing or aren't offering the best credit terms to organisations that are good payers, potentially stifling trade and growth in the economy."
The Equifax research of ICM members was conducted April 2012, and 189 members responded.
Late payments don't just destroy cash flows; they destroy relationships. We had a client last year where we completed work on time incurring considerable travel expenses. They didn't pay us for SIX months, not because it was their standard payments terms, but because: the invoice was lost, the payables system needed 'rebooting', the payment missed the payables run, 'someone' took it out of the payable run, ETC. When we were finally paid, the client e-mailed "Thankyou for your patience." Yeh right, apoplectically patient.
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