Last Updated on: 22nd November 2023, 02:37 am
Businesses pay their smallest suppliers 30 days later than their bigger suppliers1. Data released today by Previse, the fintech that uses AI to get suppliers paid instantly, shows the extent to which the problem of slow payments is concentrated among small suppliers, a fact which public payments reporting fails to highlight.
Previse has released the findings of an analysis of over 10 million invoices (representing more than £24 billions of spending by some of the UK’s largest buyers). The figures show that, while late payments are rife throughout the supply chain, the smallest suppliers are paid 30 days late while firms charging the biggest fees are paid, on average, less than a day late.
Suppliers invoicing for a value less than £10,000 p.a. are not even processed by buyers until 35 days after being received on average, ensuring that payment, usually due within 30 days, is late before the invoice has even been approved. Large suppliers, on the other hand, have their invoices prioritised, taking just 3 days to be processed, while also being paid faster after being approved.
Large firms in the UK are now required to publish official statistics on how quickly they pay suppliers. However, the reporting does not require them to provide separate figures for SME suppliers. This means that, while the average time it takes to pay an invoice is 37 days2, it is likely that the situation for SMEs – those suppliers most in need of fast payment – is far worse.
Slow business to business (B2B) payments caused by inefficient payment terms cost the world’s economy almost £250 billion every year3. They cripple business and economic growth and are one of the leading killers of small suppliers4. Paying slowly also costs large buyers, because a supplier’s expensive cost of borrowing is priced into the cost of the goods or services supplied.
In response to this new data, Previse calls for the Government to require companies to report specifically on their treatment of SME suppliers to ensure that they are properly protected.
Paul Christensen, CEO and co-founder of Previse, said: “We know that slow payments are a system-wide disease in our economy. This analysis shows, however, that the smaller a supplier you are, the tougher it is to get paid what you are owed on time. This is critical because these are exactly the suppliers most vulnerable to slow payments. As the FSB has shown, 50,000 SMEs close each year due to slow payments.
“The best firms are working hard on improving payment practices, but we need to remain vigilant and ensure that things are not just getting better for the biggest, and most powerful suppliers. Regulators and businesses need to understand the situation, and the unique challenges, faced by the smallest suppliers and find solutions which meet their needs.”
