Late Payments Present Challenges For SMBs Amid The Pandemic

Late payments plague vendors and suppliers throughout the world, with small businesses often left holding past-due invoices.

This week’s B2B Data Digest highlights the prevalence of late payments globally — in addition to the ways that FinTechs and governments are aiming to tackle this challenge.

60% is the minimum percentage of small businesses that regularly have invoices paid late, according to an announcement from British banking platform Tide. “This creates a huge cash flow issue and puts small businesses in serious danger of collapse, particularly in the current turbulent climate,” the company said in the announcement. Tide recently teamed with recurring payments firm GoCardless to roll out a service that will enable its members to accept invoice payments via Direct Debit. Members will have the ability to set a time to collect payments when the invoice becomes due.

43% is the share of companies that have reported a rise in the number of late payments, as noted in the PYMNTS Disbursements Tracker. The statistic comes as companies of all sizes are doing their best to stay on top of evolving payment trends and consumer expectations as COVID-19 keeps affecting how money is moved. These quickly changing trends have also led most firms to become more worried about their own cash flow status — knowing the status of their incoming and outgoing payments can make or break for these entities.

37 is the average number of days that businesses are being paid past the due date, according to data cited in an announcement from the Australian Small Business and Family Enterprise Ombudsman. Kate Carnell, the ombudsman, called for large companies to report their payment times to small business vendors as soon as feasible, with the Payment Times Reporting Scheme to take effect in January. Carnell indicated that it is important that companies with an annual turnover in excess of $100 million take note of the intention of the legislation. “These new laws represent important progress at a time when Australian small businesses are hurting and need to be paid on time to survive,” Carnell said.

14.7% is the percentage of business-to-business (B2B) receivables that are overdue on average, as noted in the September PYMNTS B2B Payments Innovation Readiness Report. Overdue invoices are not only an SMB problem: As for firms that generate half a billion in yearly revenue, 16 percent of their B2B receivables are overdue in contrast to 14.3 percent for mid-sized companies generating from $50 million to $500 million. COVID-19 has led companies of all sizes to take another look at their accounts receivable (AR) processes, where days sales outstanding (DSO) — the count of days it takes to collect payments — are being stretched.

Approximately $1.49 billion in late payments were owed to renewable generators by distribution companies, Mercom India reported, citing information from the PRAAPTI portal of the Ministry of Power. Furthermore, the portal indicated that 66 distribution firms owed approximately $16.44 billion in past-due payments throughout just under 19,950 invoices to power generators at August’s conclusion. By contrast, distribution firms were on the hook for approximately $16.07 billion in past-due payments throughout just under 19,200 invoices in July.