The coronavirus pandemic has affected businesses of all sizes, across a range of sectors. However, SMEs have been particularly hard hit when it comes to the issue of late payments. According to the
UK Government, currently, £23.4bn worth of late invoices are owed to firms across Britain, which it states is hindering businesses’ cash flow and their ultimate survival post-Covid.
As the lifeblood of the UK’s economy – with SME turnover alone
estimated at £2.2 trillion annually (pre-pandemic) – tackling the issue of late payments will be vital in enabling small businesses to reach their full productive potential and improve not only the growth of their business, but the growth of the UK economy.
So, how can businesses avoid falling foul of late payments?
One thing all businesses can do to help build a more sustainable supply chain, is to reduce lead times when it comes to supplier payments. Importantly, it’s not just suppliers who will benefit from faster payments – it’s good for buyers too. By doing so,
businesses can benefit from significant process efficiencies, and contribute to minimising supply chain disruption. Unblocking this bottleneck will also help SMEs to plan ahead, build the confidence to invest and crucially, keep cashflow moving across the
Digital solutions can help reduce late payments and streamline both the payment and payment collection process. The straightforward and low-cost set-up of such tools means suppliers of all sizes can be supported, unlike more traditional, complex offerings
that only made sense to be set up and offered to large suppliers.
However, whilst throughout many industries digital transformation has been delivered at an unprecedented rate over the last twelve months, the opportunity to adopt digital solutions to tackle late payments remains largely untapped – something that needs
to change if we are to move the dial on this issue. In particular, invoice financing platforms provide a simple, digital first method for suppliers to decide when they want to be paid, usually in exchange for a small discount. This ultimately helps them to
gain faster access to cash and gain more control over their cashflow.
American Express has enhanced the supplier experience by offering a range of tools to enable suppliers to digitise their payment processes and opt to get paid early by their suppliers. This enables them to access capital quickly and choose when payments
are made, and also helps to ensure seasonality doesn’t put a strain on cash flow. As a result, suppliers can rely on a fast and easy onboarding, payment and reconciliation process.
2021 is the year to recover and build back stronger, so tackling the endemic issue of late payments should be a business priority. If businesses work together to embrace digital solutions to pay suppliers faster, it will help go some way towards the overall
recovery and create a more robust and sustainable trading environment for businesses of all sizes.