Late payments aren't just affect the company waiting to get paid - they're disrupting the entire supply chain - and could even result in rising costs for consumers, or less ability to hire new workers.
These are the findings of a report from payments service provider GoCardless. Polling 500 UK decision-makers for the report, the company found that 86% agree - one late payment affects the entire supply chain.
Of a third (31%) that have paid their supplier late, almost half (47%) said they had no choice, as their customers were late with payments themselves. Almost two in five (38%) said being paid late made them consider paying their own suppliers late, which only “pushes the problem downstream”.
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The effects of this “vicious cycle” transcend payments. More than a third (35%) of the respondents said they considered raising the prices of their products and services to customers, while a quarter (26%) said they thought about postponing new hiring plans.
Boosting the entire economy
Supplier don’t seem to be doing it on purpose, however, as 97% agreed everyone should be paid on time. What’s more, the first thing a fifth of the respondents would do, after getting paid, is pay their own suppliers.
GoCardless says that businesses who receive payments through physical methods, such as cheques, were forced to wait an average of 22 days. Those that use account-to-account payments, like bank debit, wait less than four days, on average.
Pranav Sood, VP Small Business at GoCardless, says the trickle-down effect late payments have both on suppliers and customers often gets ignored.
“Prompt payments power change that can boost the entire economy,” he says.
Dr. Roger Barker, Director of Policy at the Institute of Directors, (a member organization of Good Business Pays), agrees, adding paying on time 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.”
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