Dun and Bradstreet payments report – good news!

Dun and Bradstreet published their 2012 European payment trends report recently – it is available here D&B Factsheet  It looks at payment data for 9 countries, and now has 6 years of historical data to consider.  The most surprising fact - surprising if you assume that pretty much any economic news these days is bad news - is that payment performance in the UK has actually improved.

“... based on an analysis of proprietary D&B data,the average time taken by British businesses to pay bills has improved by two days throughout 2012 to an average of fifteen-days late against agreed payment terms. British Businesses have been steadily paying bills later in recent years, from thirteen days late in 2006, peaking at seventeen days in 2011”.

OK, so it's not a huge improvement, and the average is still 15 days late against terms,  but it is a step in the right direction.  The UK finance and insurance sectors are the worst payers, at 17 days over terms, whilst agriculture is a mere 11.

In terms of international comparisons, Germany are the “best” payers, just 6 days beyond terms, whereas Portugal are the worst at 22 days late. But watch out for the Spanish public sector – not good at 24 days beyond terms!

There are also new EU regulations to consider. As D & B says:

D&B’s data highlights the potential impact of the recently updated EU Payments Directive (Directive 2011/7/EU) that sets the basis in law for suppliers to reduce risk and protect cash flow. This legislation makes it easier for businesses to pursue payment, with debtors being forced to incur interest and pay an administration fee if they fail to pay for goods and services within 60 days for business and 30 days for public authorities.  Whilst it will help protect some businesses, the updated Directive presents new risks for companies struggling to manage their finances and pay on time, due to the potential interest liability risk. 

So, assuming we believe the data, what might have caused the positive change in the UK? Here are four possible hypotheses.

1. The gradual adoption of e-invoicing, supplier networks and the like may be helping organisations simply get better at managing their P2P processes. We tend to think that late payment is a deliberate tactic used by organisations to manage cash flow, but much late payment is actually  caused by poor processes and incompetence. So if technology is gradually improving that situation, we might expect to see an improvement in organisations actually meeting the agreed payment terms.

2. The economy may be doing somewhat better than we think, such that firms feel more confident about paying on time and less need to retain their cash.

3. On the other hand, it may be that some high-profile bankruptcies - ranging from retailers to football clubs - has left suppliers more worried about actually getting paid at all. So, when they are in a position of power, might suppliers be demanding "cash on delivery" or its equivalent more often?

4. Perhaps some of the bad publicity we've seen recently about firms who have extended payment may be having an effect. We've seen Sainsbury’s and others getting hammered in the press for taking such steps. But are organisations thinking twice now about using this approach? More have signed up to the Prompt Payment Code as well, so it would be nice to think so...

I don't know which of these, if any, carry the ring of truth. And we'll see in time whether this is a one-off improvement or the start of a longer-term trend, but it is at least a ray of light in a gloomy economic world...

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