Delayed payments halt early discount opportunities - report

According to recent findings of a global research report entitled ‘Creating Payment Energy’, by Basware and MasterCard, 84% of respondents pay suppliers late, with one of the main reasons being the lack of necessary systems and automation to facilitate timely payment. Late payment reduces critical operational expenditure and hinders businesses to accurately forecast their cash position beyond ten weeks ahead – which leads to financial instability and hinders economic growth.

The survey also finds that suppliers are prepared to offer substantial discounts to bring payment forward, potentially and unknowingly undermining their own margin structures.

The average discount offered is 8%, but some respondents said they will offer 50% or more in certain circumstances.

The research findings also indicate that respondents estimated that they could save, on average, 14% of overall financial expenditure if all customer invoices were settled on optimum payment terms in their business. Businesses want to take advantage of these offers, with 44% saying they would prefer to pay immediately for a higher discount, the study adds.

However, 7 out of 10 (69%) businesses surveyed admit that process bottlenecks compromise their ability to access supplier discounts. In fact, only 1 in 5 businesses have highly automated processes with fully optimised systems to manage invoice payment efficiently, the study points out.

The research highlights that while 88% of buyers believe they have a social responsibility to pay promptly, it still takes an average of ten days for payment to take place.

The study also shows that the benefits of timely payment are many and widely recognised. 4 out of 10 respondents said that it would help reduce credit lines as well as enable them to invest more in their business overall. Additionally, 36% said it would also improve relationships with creditors and a third viewed it as a way to reduce resources on payment settling.

As financial decision makers try to balance the ethical and commercial implications of timely payment with the desire for financial security, there is an important role for the intermediary processes that surround payment, the report suggests. As it stands, the majority of invoices are sent and received via PDFs within emails (48 and 50% respectively). Approximately a third (32%) use EDI/XML systems to send invoices and a quarter receive them this way, while web portals are used by 17% of respondents to send invoices and 19% to receive them.

The ‘Creating Payment Energy’ research surveyed over 1,000 strategic decision makers across Australia, Europe and the US to study the dynamics of cash flow and payment processes and their impact on economic performance.