# Half of businesses admit to paying suppliers late Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2017-11-18 Category: BUSINESS Category URL: https://financedigest.com/category/business Meta Title: Late Payments to Suppliers: Top causes revealed in new research Meta Description: New research by Tungsten Network and IOFM highlights challenges faced by businesses in paying suppliers on time, including slow internal processes and lack of URL: https://financedigest.com/half-of-businesses-admit-to-paying-suppliers-latehtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/fd181117-1-1-1736843230600-compressed.jpg) _Research reveals internal processes and a lack of automation are top causes of late payments to suppliers, above cash flow constraints_ Slow internal processes and a lack of automation are among the biggest challenges for businesses when it comes to paying their suppliers on time, according to new research by Tungsten Network and the Institute of Finance and Management (IOFM). The Friction Index research found that almost half (47 per cent) of businesses admit that at least one in 10 payments to their suppliers are made after their agreed payment terms – typically 30 to 60 days. Of these, 16 per cent of businesses said that a fifth of their payments are never on time and only five per cent of businesses [claim to always pay](https://www.financedigest.com/cvs-walmart-walgreens-agree-to-pay-13-8-billion-to-settle-u-s-opioid-claims-sources.html "CVS, Walmart, Walgreens agree to pay .8 billion to settle U.S. opioid claims – sources") their suppliers in the time promised. In addition, one in 12 of businesses admit [failing to monitor their payment practices](https://www.financedigest.com/factoring-in-fail-safes-five-practical-steps-for-more-efficient-transparent-reporting.html "Factoring in fail-safes: five practical steps for more efficient, transparent reporting") altogether. This [research coincides with the new UK law requiring companies to report](https://www.financedigest.com/automotive-timing-chain-and-belt-market-to-be-valued-at-us-10-20-bn-by-2027-comprehensive-research-report-by-fmi.html "Automotive Timing Chain and Belt Market to be valued at US$ 10.20 Bn by 2027 – Comprehensive Research Report by FMI") on their payment policies, practices and performance. This new requirement from the Department for Business, Energy and Industrial Strategy (BEIS) has been introduced to tackle issues around [late payment](https://www.financedigest.com/the-late-payments-toolkit-how-to-keep-the-cash-flow-strong.html "THE LATE PAYMENTS TOOLKIT – HOW TO KEEP THE CASH-FLOW STRONG") and will require businesses with an April year-end to report as early as November 30, 2017. The Friction Index found that businesses identified the following issues as the biggest challenges when it comes to [paying suppliers on time](https://www.financedigest.com/why-it-pays-to-pay-on-time-the-impact-of-delayed-payments-on-supplier-relationships.html "Why it pays to pay on time: The impact of delayed payments on supplier relationships") as: 1. Slow internal processes (64%) 2. Lack of automation (39%) 3. Administrative errors (27%) 4. Team capacity to manage the volume (20%) 5. Managing cash flow (16%) Richard Hurwitz, Tungsten Network’s CEO, said: “Late payments impact [economic growth](https://www.financedigest.com/economic-growth-risks-jolt-inflation-obsessed-markets.html "Economic growth risks jolt inflation-obsessed markets"). Chasing [payments is a source](https://www.financedigest.com/sabadell-in-talks-with-worldline-nexi-and-fiserv-for-payments-deal-sources.html "Sabadell in talks with Worldline, Nexi and Fiserv for payments deal -sources") of frustration for suppliers and buyers alike. “However, there is a common misconception that these [late payments are solely as a result of managing working capital or businesses](https://www.financedigest.com/technology-is-a-tonic-for-late-business-payments.html "TECHNOLOGY IS A TONIC FOR LATE BUSINESS PAYMENTS") holding onto their funds for as long as possible. Our research shows that when it comes to late payments, clunky internal processes and slow paper-based systems are the predominant causes, leading to friction in the [supply chain](https://www.financedigest.com/volkswagen-sticks-to-outlook-as-size-offset-supply-chain-woes.html "Volkswagen sticks to outlook as size offset supply chain woes"). “Businesses ultimately need to get paid in order to [invest](https://www.financedigest.com/esg-investment-making-your-business-a-more-sustainable-place.html "ESG investment: Making your business a more sustainable place") in more work. Late payment [impacts working](https://www.financedigest.com/the-pandemics-impact-on-working-mothers-new-research-reveals-that-two-thirds-have-stopped-working-or-now-work-less.html "The Pandemic’s Impact on Working Mothers: New Research Reveals That Two-Thirds Have Stopped Working or Now Work Less") capital and economic production. Arranging invoice payments can be a complex task, particularly if it’s cross-border and involves ensuring compliance with local tax laws. Businesses should feel supported, not pressured, in ensuring that their suppliers can be paid on time. “Identifying instances of friction within the procure-to-pay work stream is the first step towards removing them and in many cases, technology can do away with these cumbersome and menial tasks taking up precious time and instead [boost productivity](https://www.financedigest.com/flexible-pay-can-boost-low-productivity-in-the-uk.html "Flexible pay can boost low productivity in the UK") and efficiency.” As the volume of [global transactions continues](https://www.financedigest.com/building-and-construction-to-continue-accounting-for-nearly-half-of-tower-cranes-sales-globally-fmi.html "Building and Construction to Continue Accounting for Nearly Half of Tower Cranes Sales Globally: FMI") to rise, the proportion of e-invoicing has also grown, with businesses feeling the benefit of a reduced influx of paper invoices. According to latest figures from the European E-invoicing [Service Providers](https://www.financedigest.com/tech-amigos-provides-unrivalled-aws-cloud-service-support-for-autorama-groups-leading-brand-vanarama-2.html "Tech Amigos provides unrivalled AWS cloud service support for Autorama Group’s leading brand, Vanarama") Association (EESPA), over 1.6 billion e-invoices were processed in 2016, a 23 per cent increase on 2015 (1.3 billion). “Suppliers rely on timely customer payments to [pay staff](https://www.financedigest.com/unicredit-to-pay-bonus-replace-850-older-branch-staff-in-italy.html "UniCredit to pay bonus, replace 850 older branch staff in Italy"), manufacture, market, sell and ship goods, and invest in the business.  [Late payments](https://www.financedigest.com/how-big-is-the-late-payments-crisis-and-who-will-break-the-deadlock.html "How big is the late payments crisis and who will break the deadlock?") negatively impact working capital, economic production, and partner relationships,” said IOFM Executive Director Brian Cuthbert.  “The Friction Index reveals that the problems caused by late payments can be eliminated through automation. Eliminating friction in the procure-to-pay cycle enables buyers to pay their suppliers on-time to strengthen relationships, gain leverage in contract negotiations, and ensure the stability of their [supply](https://www.financedigest.com/strained-supply-chains-keep-u-s-producer-prices-hot.html "Strained supply chains keep U.S. producer prices hot") chain.” Tungsten Network and IOFM developed The Friction [Index for businesses](https://www.financedigest.com/world-bank-scrapping-ease-of-doing-business-index-is-a-reminder-to-focus-on-fundamentals.html "World Bank scrapping Ease of Doing Business Index is a reminder to focus on fundamentals") to assess and identify the causes or friction within their processes. Finance teams at large companies with more than 1,000 employees, and smaller [firms with less than 100 employees from nearly](https://www.financedigest.com/rouble-eases-from-near-4-week-high-vs-dollar-firms-vs-euro.html "Rouble eases from near 4-week high vs dollar, firms vs euro") 500 businesses all over the world took part in the study. They were asked about what [supply chain](https://www.financedigest.com/supply-chain-management-bpo-market-is-thriving-with-rising-latest-trends-2014-2020.html "Supply Chain Management BPO Market Is Thriving With Rising Latest Trends 2014 – 2020") friction looks like for them and the impact it has on their business. By analysing the current state of potential causes of friction and the priority level of removing friction from procure-to-pay processes, Tungsten Network and IOFM created a friction score which it will be able to review year-on-year. To view the full study visit: [http://www.tungsten-network.com/procure-to-pay-friction/](http://www.tungsten-network.com/procure-to-pay-friction/) To find out your business’ causes of friction, visit [http://frictionfinder.com/](http://frictionfinder.com/). --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---