Is lack of automation the real reason you’re being paid late?
It is often suggested that late payment is a result of companies holding on to funds either through greed or to manage their own cash flow. But new research suggests that slow internal processes and a lack of automation are the real culprits.
The Friction Index research by Tungsten Network and the Institute of Finance and Management (IOFM) found that almost half (47%) of businesses admitted to paying suppliers late, with at least one in 10 payments made after the agreed credit period.
Of these, only 5% claim to always pay their suppliers on time and 16% said that a fifth of their payments are never paid within agreed terms.
One in 12 businesses said that they fail to monitor their payment practices at all.
But, interestingly, cash flow constraints were not the biggest challenge when it comes to paying suppliers on time. Only 16% identified this as an issue.
Instead, the research showed slow paper-based systems are the predominant cause of late payments (64%).
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A lack of automation is another big challenge (39%) when it comes to paying suppliers on time, followed by administrative errors (27%) and team capacity to manage the volume (20%).
This suggests that the problems caused by late payments to suppliers can be eliminated through automation.
The research follows the introduction of the government’s new payment reporting regulations.
The new reporting measures from the Department for Business, Energy and Industrial Strategy (BEIS) require large businesses to report on their payment practices and performance in a bid to increase transparency for suppliers and encourage the worst offenders to clean up their acts.
Businesses with an April year-end will be required to report as early as 30th November 2017.
What do you think? Would automation improve payment times? Let us know in the comments below.