January 18, 2022

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SMBs: Relief In Fast-Paying Corporate Customers

Before the pandemic, late B2B payments put a cash flow crunch on countless small and medium-sized businesses around the world. Now, amid the coronavirus crisis, many of those SMBs are getting hit even harder as supply chain disruptions, sluggish business and shutdowns have created a ripple effect of delayed invoice payments.

This week’s B2B Data Digest examines the latest numbers behind the late payments problem that continues to plague SMBs at a time when healthy cash flow is essential to survival. There is a bright side, however: larger corporates in some markets are banding together in an effort to accelerate payments to their smaller vendors and contribute to a healthier supply chain.

35 Greek lawmakers are urging the government to pressure tour operator giant Tui into paying its vendors, reports in the Financial Times said recently, as allegations by hoteliers claim the conglomerate is late on invoice payments. Tui reportedly usually pays its hotel partners 60 days after customer departure dates, but changes to contracts mean three-quarters of the funds Tui owes hoteliers won’t be paid until March 2021. Two hoteliers told the publication that Tui owes them each more than €600,000, while another travel operator said it is owed €70,000.

46 percent of small business invoices were paid late during the pandemic lockdown in the U.K., between April and June, according to Global Banking and Finance Review reports. While that figure represents a steady rate of late payments compared to pre-pandemic levels, researchers also found that the number of invoices actually sent by SMBs plummeted by 33 percent, meaning a greater portion of the invoices that were sent were paid late. In addition to cash flow problems as a result of the pandemic, the publication also found other factors to contribute to a rise in late payments, including a failure among many businesses to adopt technology that could support electronic invoicing and payments during stay-at-home orders. The publication also pointed to limited effectiveness of government initiatives designed to combat late payments as another contributor.

47 percent of SMBs say payment collection times have lengthened over the last 12 months, according to new data from Forrester Consulting commissioned by GoCardless. Researchers found that only 4 percent of SMBs surveyed have a day’s sales outstanding of under 10 days, and about 80 percent say they wait up to 30 days to receive payment.  According to the report, these delays in payment receipt have “a tremendous impact on cash flow and revenue, and prohibit company growth.”

50+ large corporates across South Africa have vowed to pay their small and medium suppliers in 30 days, reports from IT-Online said recently. The organizations have banded together to form initiative #PayIn30, an effort led by Business for South Africa (B4SA), the SA SME Fund and Business Leadership South Africa, while other small business advocate groups have also supported the effort. Reports pointed to cash flow issues that have hit small businesses in the midst of the pandemic, though highlighted data from Xero that found 91 percent of small businesses were facing late invoice payments before the pandemic. The new initiative aims to institute a “culture” of prompt B2B payments, reports said.

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NEW PYMNTS STUDY: ACCELERATING THE REAL-TIME PAYMENTS DEMAND CURVE – NOVEMBER 2020

About: Accelerating The Real-Time Payments Demand Curve:What Banks Need To Know About What Consumers Want And Need, PYMNTS  examines consumers’ understanding of real-time payments and the methods they use for different types of payments. The report explores consumers’ interest in real-time payments and their willingness to switch to financial institutions that offer such capabilities.

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