New research suggests that a single late payment doesn’t just affect the business immediately involved, but triggers a domino effect that tumbles down the entire payment flow.
According to a survey of 500 UK business decision-makers from the account-to-account payments provider GoCardless, 86% agree that one late payment affects everyone in the supply chain. Indeed, out of the 31% of businesses that have paid a supplier late, almost half (47%) say that it was due to late or failed payments from their customers.
“Slow and late payments present a challenge to businesses of all sizes, but what is often ignored is the trickle-down effect this has on both suppliers and customers,” comments Pranav Sood, VP Small Business at GoCardless. “Prompt payments power change that can boost the entire economy. This is why GoCardless is pushing for improvement, not only for the businesses we support but also for the suppliers and customers implicated in the wider chain.”
Nearly four in ten (38%) report that receiving late payments has made them consider delaying payments to their own suppliers, pushing the problem further downstream.
The burden of late payments was found to extend even to those outside the flow of funds. Over a third (35%) of businesses indicate that late payments would make them think about raising the price of their products or services for customers. A quarter (26%) say they would consider postponing their hiring plans, potentially impacting the availability of much-needed jobs.
The findings indicate, however, that businesses would like to turn this vicious cycle into a virtuous one, with 97% of respondents agreeing that every business should be paid on time. And, the first thing one in five businesses (20%) would do if they collected all of their receivables on time is to pay their own suppliers sooner.
The news comes as GoCardless published their 2021 Global Payment Timings Index, an analysis of over 40 million payments to establish benchmarks for how long it takes a business to get paid.
The data presented in the index highlights how businesses using account-to-account payments like bank debit benefit from the shortest waiting time between charging a customer and receiving funds into their account, with those using bank debit via GoCardless getting paid, on average, in 3.6 days. This is more than five times faster than physical methods such as cheques; where merchants typically have to wait an average of 22 days to receive payment.
Given the downstream effects of a single late payment, the index and related research highlight the impact that one company’s payment strategy could have on a wider ecosystem.
To further address the issue of late payments, GoCardless has partnered with Good Business Pays, a movement backed by the UK’s largest business groups that aims to bring an end to slow and late payments.
In response to the concerns highlighted by the research, Dr. Roger Barker, Director of Policy at the Institute of Directors – a member organisation of Good Business Pays – remarks, “These findings indicate that paying on time is not something that benefits a single organisation. It has a positive impact up and down the supply chain, and beyond. All businesses must play their part to better this issue for the good of the broader economy, especially as we rebuild in this post-Covid world.”