UK suppliers breaking off business ties with companies due to late payments

According to a surveyby Ivalua, six in ten (59%) UK businesses stated their relationships with suppliers had ended as a result of frequent late payments, and 62% said such ties had been severely harmed.

If companies keep making late payments, two-thirds of businesses (67%) worry that there would be a "global cashflow catastrophe."

A third of businesses (35%) had a “severe lack of visibility” into payments and 58% of organizations reported a separation between their procurement and finance teams, making it even harder to make sure that suppliers are paid on time.

The major issues resulting from this lack of sight were a higher risk of fraud (64%), the inability to use payments strategically (50%), and the difficulty implementing milestone or staged payments (47%).

Stephen Carter, director of payments strategy at Ivalua, said: “Similar to when Covid-19 hit, and now with rising energy bills, the financial strain businesses and suppliers are under means we are facing the risk of another cashflow crisis. Timely payments are critical to gain favor with suppliers, helping to open the door to better collaboration.”

“As businesses across all industries struggle with rising bills, it’s vital that they work to improve visibility into supplier payments and drive operational efficiencies. Using payments strategically and maintaining a collaborative relationship with suppliers will help businesses to manage a cashflow crisis, even as supply chains come under increasing pressure,” Carter continued.

Small and medium-sized businesses (SMEs) have the power to propel an economy but given the threat of growing costs and rising borrowing costs, it is crucial that they strive to develop long-term plans to manage their cash flows.

One of the ideas that we explain in our book Let The Cash Flow is the Virtuous Revenue Cycle (VRC), which consists of eight steps to getting paid on time. It includes taking responsibility for the problem and reviewing your credit policy to motivate your sales team, as well as constant and consistent communication with your customers.

When VRC is used appropriately, it ensures that you are closer to your customers than your competitors and that you are in a better position to identify potential concerns to get paid on time.

Get more tips on effective cash flow management from our book, Let The Cash Flow. To find out more about how RIABU helps small businesses get paid on time, visit RIABU.com