Sidetrade Unpaid Invoice tracker: what the pandemic has taught us

With billions of euros tied up in unpaid invoices during lockdown, Rob Harvey, Global Director at Sidetrade, shares learnings about B2B late payment across Europe based on the findings of Sidetrade’s Unpaid Invoice tracker

Late payment pandemic

As businesses across Europe slowly emerge from the Coronavirus lockdown, cash flow remains a top priority for every industry. With bank credit spent, and uncertain revenue, the survival of many companies depends on their ability to free up cash tied up in overdue receivables. This was shown, week after week, by the Sidetrade Unpaid Invoice Tracker. According to a PwC report, 1.3 trillion dollars are tied up on balance sheets.

Pivoting not panicking

In response to COVID-19, agile businesses pivoted their teams, products, and resources to adapt, and bounce back. Sidetrade, the AI software developer, did its own pivot, and created the Unpaid Invoice Tracker to provide decision-makers with invaluable data on one aspect of the crisis.

Insights from AI on customer behaviour

The Tracker analyses B2B late payment across the UK, France, Spain, Italy, Belgium, and the Netherlands. It covers over 26 million invoices worth 54 billion euros, and more than 3.7 million businesses in 12 industries.

Sidetrade examined overdue invoices at least ten days late. They then retroactively calculated the ratio of late invoices to all outstanding invoices, week by week, since 1 January 2020, and determined average unpaid invoices from the start of the year to 11 March 2020, when the Covid-19 epidemic was officially declared by the WHO.

Payment trends during the crisis

From 1 January through 11 March 2020, the Sidetrade tracker shows relative stability in late payment− around 20% for all of the countries surveyed. Needless to say, since 11 March 2020, payment delays have skyrocketed. The rate in the UK hit 43% compared to 30% pre-pandemic, while France saw a peak of 38% of invoices overdue, compared to 19.6% pre-pandemic. Late payment reached 29.4% in Spain, 28.7% in Italy, and 32.24% in Belgium.

The UK already had the worst late payment track record, which impacted the rise in late payment during lockdown. The UK Government has tried to address this problem in several ways. In 2019, the Department for Business published a report called ‘Creating a responsible payment culture’, to raise the profile of the issue and introduce new measures. A GBP 2 million Business Basics Fund was created, to help businesses purchase technology to modernise their processes, including getting paid.

Digitalising order-to-cash processes is now crucial

The pandemic has accelerated digital transformation to make businesses more efficient and less exposed to disruption. However, many UK companies don’t seem to realise how tech can drive business outcomes and improve credit management. Investment in digital is now crucial to make finance teams more agile, and to automate order-to-cash processes. In the UK, perhaps only 5 to 6% of corporations have dedicated technology. The UK is behind in this area. In the Netherlands, it’s closer to 75% of companies. There is considerably more autonomy at the operational level in credit management, where finance executives can invest in the technology needed to fix problems like late payment. In the UK, however, such technology investment decisions are taken at a much higher level, where operational finance teams have less influence.

Unlike the UK, the Netherlands had the best performance for B2B payment before the pandemic (15.4%), and recovered faster (currently 15.9%), according to the Sidetrade Tracker. The Netherlands also took what it called a ‘smart’ lockdown approach, which seemed less stringent than that of the UK and France. Their lockdown approach may also have lessened the impact on normal business operations, meaning less strain on cash, so the temptation to withhold payment was reduced.

Four factors for recovery

1. We need to recognise that businesses will continue to face a cash crisis. Some will fall into a debt trap, make people redundant, and eventually go bankrupt. Others will fare far better because of their ability to retain customers and collect outstanding cash. Late payment tells us a lot about the buyer-supplier relationship.
2. The rate of business recovery will amongst countries and industries. For example, travel and tourism will struggle to rebound. Commercial real estate has also been hard hit due to store and shopping centre closures.
3. Everyone needs to keep talking about the problem of payment, not just in terms of cash, and business transactions; but also in terms of human relations. Chasing late payments and negotiating due dates always come down to people skills.
4. Businesses need to come up to speed with the latest technology. The Netherlands shows us that technology can be a massive game-changer - not as a magic bullet, but as an essential tool to support people in their jobs and business relationships.

A survey of CFOs carried out in May 2020 by PwC, found that 48% will accelerate automation and new ways of working. Similarly, a study by Gartner found that CFOs plan to maintain, rather than cut, investment in technologies such as AI, automation, and analytics. 24% plan to invest more in RPA, workflow automation, and cloud-based ERP technologies (20%). It is now vital to implement these technologies to generate cash.

Conclusion

To cope with the late payment fallout of the COVID pandemic, we need new ways of working and new technologies. The Netherlands is weathering the crisis better than others. What’s their secret? If only they would let the cat out of the bag! Or as the Dutch say: ‘Nu komt de aap uit de mouw’

About Rob Harvey

Rob Harvey is director of solutions consulting at AI firm Sidetrade. Before joining Sidetrade, he held senior roles with Accenture, Verizon, and Orange.

About Sidetrade

Sidetrade