A solution to late payment

SMEs are owed nearly £40bn as a result of late payments

Another buyer / supplier dispute hit the pages of the national press this week. This time, suppliers of a UK food manufacturer criticised what they said were “beyond unreasonable” terms in proposed contract agreements.

According to reports, the firm in question has been seeking more than four months to pay its bills, and trying to claim a 3% discount for paying within 90 days. The news follows the controversial recent ‘pay to stay’ demands made by another food manufacturer to its suppliers.

While there are always two sides to a story – and the manufacturer in question may well face similar pressures from its own customers – these incidents are a clear illustration of the strained relationships within supply chains at present.

And it’s also not hard to see why this is such a sensitive issue. According to data published this summer, SMEs are owed nearly £40bn as a result of late payments – on average, £38,186 per company. A quarter of respondents to the study said that if this amount grew to just £50,000 (a rise of less than £12,000), it would be enough to send them into bankruptcy. So this is a question of survival for many small businesses.

Regulators have done a great deal to try to fix this issue. For example, under the EU Late Payment Directive, companies should not take more than 60 days to pay invoices without agreement from the supplier. But clearly this is not enough.

One service that does offer a solution to the problem is invoice finance. Tungsten Early Payment, which has recently launched in the UK and the US, allows suppliers to decide if they want to take early payment on any approved invoices. Suppliers can view their outstanding invoices online and select those on which they want early payment – larger bills, perhaps, or those owed by a well known slow payer. At the push of our “green button” they receive the full payment, less a small charge, within a day from Tungsten; we then retrieve the payment from the original buyer on their specified terms.

It may not be a panacea for imbalances of power within the supply chain, but it can give suppliers that crucial peace of mind that the big payment they’re waiting for will come in time.

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