Tungsten Research on Late Payments – Confirmed as Significant Problem

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The issue of late payment, beyond the supposed agreed terms by the contracted parties, keeps coming back to the business pages and sometimes even the front pages, with large powerful firms regularly accused of exploiting their position to screw – sorry, legitimately exploit the power balance in the supply chain with their smaller suppliers.

Now Tungsten, eInvoicing and Supply Chain Finance solution provider, has published the results of some recent UK-based research, which confirms the theory that this is a really serious problem. So far, we’ve only had a press release from the firm. It would be good to see the full detail of the research, which sounds genuinely interesting, so we can dig into the variations a little more, by sector for example, if the data exists.

Anyway, the depressing headline is that “the average SME is owed £40,857 in unpaid invoices, a survey by Tungsten Corporation revealed, with £20,937 of that total overdue.”

So half the money owed is late. Applying that across the UK’s 5.2 million SMEs, the total owed could be as much as £212 billion, of which over £100 billion would be late. That is a huge finding gap caused by arguably unethical if not actually illegal action by buying organisations.

Richard Hurwitz, CEO at Tungsten, said: “These figures are a telling reminder of the challenges faced by SMEs in this country. An unpaid invoice can mean the difference between a successful month of trading and a dangerous financial shortfall. In the worst case it could lead to insolvency.”

23 percent of the thousand firms surveyed said that late payments have put them at risk of closure – another pretty scary figure. “The issue was most acute in the technology sector, where almost a third of all businesses (32%) had been impacted financially by late payments from customers.” That surprises us a little – we might have put money on the suppliers to large retailers being the most at risk.

The problem is generic though - 22 percent of those surveyed said most of their late payments were from large businesses, 11 percent pointed to medium-sized firms and 8 percent identified the public sector as being responsible for late payments. Some 33 percent of businesses surveyed said that there was no clear pattern.

So yes, large firms are the biggest culprits but it is a widespread problem. Hurwitz gave us his analysis: “There are many reasons for late payment. Sometimes buyers will wait until the last day before the invoice is due only to tell their supplier that it is missing vital information. This creates unnecessary delays. Advances in technology mean that many payments can now be processed electronically, which ensures invoices have all the necessary information, but e-invoicing was only used by a quarter of the small businesses we spoke to.”

Of course Tungsten has a vested interest here, but eInvoicing undoubtedly does provide at least the tools to make more effective payments management possible. There are solutions, as Hurwitz points out.

“Late payment is a problem to which there are simple, effective solutions. If companies adopt a modern approach and investigate alternative finance options, coupled with ongoing government support, we can make these business practices a thing of the past.”

But just how serious is the government? There has been much hand-wringing over the years (way back to the previous Labour government), but little real action, so the jury is out until we see what the much-anticipated Small Business Commissioner is actually going to do. We will know more about the seriousness with which the government views the issue once we see the Commissioner’s responsibilities – and indeed who is chosen for the role.

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First Voice

  1. Dan:

    Three words: Late Payment Directive.

    Suppliers have the power to take action against those customers that pay them late, including adding interest on the amount owed. They don’t do that. Has anybody asked why, rather than just blaming the buyer?

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