Credit Management March 2018

PAYMENT TRENDS
Spinning Around
The latest monthly business to business payment
performance statistics.
AUTHOR – Jason Braidwood FCICM(Grad)
DOUBLE standards is a
criticism that could be
levelled at the culture
of late payments in the
UK. Businesses will be
meticulous, and indeed
relentless when it comes to chasing
payment from their suppliers, but will
adopt a far more relaxed approach to
paying their own supplier invoices.
The question is whether that approach
is intentional or should be blamed on
ineffective invoice processes within
a business that make late or delayed
payment an inevitability. On the basis that
I’m a half-glass-full kind of person and
giving the benefit of doubt, let us assume it
is more likely down to failing processes or
ineffectual technology.
According to research by Sapio, one in
three UK businesses cite invoice processing
timescales as the primary reason for late
payment. Frustratingly, this is the link
in the chain that can be quite quickly
improved. Invoicing processes do not
need to be laborious – newer automation
technologies take away the stress and can
ensure that suppliers are paid instantly
or well within agreed terms. This is
particularly important and well received
by smaller businesses, or any business that
needs to keep a tight grip on cashflow.
It is also a matter of reputation and
responsibility; the foundations of any good
business along with fair business conduct,
but this can all be easily eroded through
late payment. Avoiding any reputational
shortcoming is paramount, but particularly
when it can be a relatively ‘quick win’ such
as prompt payment.
INDUSTRY SPOTLIGHT
Spinning around is a very apt description
for patterns of payment we have seen
across many of the sectors in the last
month. Not in a Kylie Minogue ‘spinning
around’ sense, but in a back-to-front,
upside-down sense, where we’ve seen
sectors do a complete 180 on their
payment performance.
Take the Public Administration sector,
which has spun out in completely the
wrong direction. The sector stood at the
top of the leader board last month having
dropped its days beyond terms (DBT)
down by nearly eight days. Fortunes have
reversed and the sector has piled on the
pounds again, adding eight days back
on to its total DBT. Interestingly, this is a
trend we saw at the same time last year,
so we could be seeing a seasonal slip in
payment efficiencies for the sector.
It is a similar story for the Energy
sector, which last month managed to
shed nearly four days from its DBT, only
to add a whole week. That sees the sector
pushing its average DBT to over 20 days – a
staggering uplift and the first time we’ve
seen a sector cross the 20-day threshold in
the last 12 months. For a sector that has its
own code of practice for accurate billing –
it is debatable if they’re taking their own
advice.
Spinning in the right direction is the
Mining sector that went from last place
adding nearly three days to its DBT, to
this month dropping back down again by
nearly four days. The sector still stands at
an average of 12.8 DBT, far higher than it
should be but still positions it in the lower
50 percent of the list of sectors.
The same is also true of the Hospitality
sector, which dropped the three days it
had added at the start of 2018. We heard
recently that the sector is the ‘most sleep
deprived profession in the UK’, but they’re
certainly not sleeping on the job this
month when it comes to efficiently paying
its suppliers.
According to research
by Sapio, one in three UK
businesses cite invoice
processing timescales
as the primary reason
for late payment.
Frustratingly, this is the
link in the chain that
can be quite quickly
improved.
Improved performance is always
welcome news, but inconsistent
performance is not. It leads to questions
over responsible business practices,
which in turn leads to reputational
uncertainty.
REGIONAL SPOTLIGHT
It was recently reported that fewer than
20 big Scottish companies have complied
with legislation aimed at tackling
late payment to their suppliers. New
regulations such as The Payment Practices
and Performance Reporting (PPPR) mean
that larger businesses (with revenues
over £36 million or 250+ employees)
should produce reports every six months
outlining their payment practices and
policies.
This is pertinent news in light of the
fact that our monthly tracking highlights
that this month, Scotland is the worst
performing region in terms of its payment
practices, with DBT rising by over three
days to reach 17 DBT, the worst performing
region in over a year. It is also the second
month in a row that Scotland has found
itself in the ‘worst performing’ list – a sign
the uptake of adhering to a better code of
payment conduct is slow.
To end on a brighter note, East Anglia
has returned to its ‘best performing’ status
having knocked nearly four days off its
monthly DBT. This is the lowest DBT score
for the region in the last quarter.
Jason Braidwood FCICM(Grad),
Head of Credit and Collections at
Creditsafe Business Solutions
The Recognised Standard / www.cicm.com / March 2018 / PAGE 60