Credit Management October 2018

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PAYMENT TRENDS The great summer slowdown The latest monthly business to business payment performance statistics. AUTHOR – Jason Braidwood FCICM(Grad) YOU could argue that it’s been a pretty good summer by most accounts. Record temperatures have meant people across the UK have been better able to enjoy some of the country’s much-loved activities. When it comes to payments, however, the story has been rather different. Looking at the late payments data, our analysis shows that the average Days Beyond Term (DBT) has increased dramatically between the last two months. When breaking down the data by sector, the average DBT across industries has shot up to 16.4 days, the highest since May 2016. The regional data paints a similar picture, with an average DBT of 15.2 days, the second highest since December 2016. Why is this? Well, there are likely to be a multitude of factors that have contributed to this trend. One thought is that the summer months are always a challenge for businesses as employees take time off to spend with their families or go on holiday. With people often away during the transaction process, reduced capacity makes it much harder to chase late payments. One could speculate that this has been exacerbated by the record temperatures we’ve seen this summer, leading to more people taking time off work to take advantage of the sun. However, when comparing August’s data to the same period last year, the difference is striking. The average DBT by sector in August 2017 was just 10.2 days. Perhaps it’s not surprising that, according to the Met Office, last summer was the 11th wettest on record, despite warmer than average temperatures. Coincidence? Perhaps, but nevertheless, this year there has clearly been a substantial impact on businesses suffering from late payments. There is also likely to be a greater impact on SMEs as late payments make it particularly difficult to maintain a robust and healthy cashflow. When your team is small, one person’s summer holiday can have major implications for the financial health of a small company. According to research from online payments provider GoCardless, 57 percent of small business owners have had to cancel personal holidays this summer in order to chase late invoice payments. Furthermore, two thirds of the businesses surveyed agreed that summer was the worst time for late payments, with more invoices paid beyond the agreed terms than any other time of year. Businesses of all sizes should therefore take note when managing their supplier relationships. Paying invoices later than the agreed terms has a negative impact not just on businesses, but also on the individuals who keep small businesses running effectively all year round. SECTOR SPOTLIGHT With the cross-sector average at its highest for more than two years, let’s take a look at which industries are most at fault. Surprisingly, ‘Businesses from home’ paid suppliers on average 20.2 DBT, an increase of 10.1 days when compared to July, the largest rise across all sectors. Elsewhere, the Education and Professional and Scientific sectors also performed poorly, increasing their average DBT by seven and 6.3 days respectively. The Energy Supply sector was the worst performing of all, taking 21 days DBT on average to pay its suppliers. On a more positive note, the International Bodies and Entertainment sectors still possess a relatively healthy DBT of 9.1 and 13 days respectively. Indeed, the International Bodies sector was the only sector to come under the ten-day mark. Meanwhile, the Education sector saw a noticeable decline, with its average DBT climbing to 15.4, an increase of seven days when compared to the previous month. Perhaps most disappointing of all, only three of the 20 sectors monitored bettered their average DBT in August, with Public Administration, Mining and the Agricultural industries each modestly improving their score from the month before. Let’s hope this isn’t an indication of things to come. REGIONAL SPOTLIGHT When breaking down the data by region, only Wales managed to improve its DBT from last month, with the remaining ten regions all performing worse. Indeed, Wales’ average DBT only decreased by 0.3 days, enough to take fourth place overall for August. East Anglia can be satisfied in retaining the top spot, possessing an average DBT of 13.1 days, a small decline from the month before. Yorkshire and Humberside (13.7 days DBT) along with Northern Ireland (13.8 days) closely follow behind along with Wales (14.1 DBT) and the South East (14.3 DBT). Scotland continues its miserable late payments run, once again taking home the wooden spoon. London also fared badly, holding onto second-to-last place, paying its suppliers 18.8 DBT, a fall of 2.5 days. The West Midlands is the third worst performing region, taking on average 15.2 days to pay its suppliers. Looking forward, it will be interesting to see if next month’s results improve from the current standings. Scotland and London in particular have often languished towards the bottom of the rankings, so let’s hope there are signs of progress to come. Jason Braidwood FCICM(Grad), Head of Credit and Collections at Creditsafe Business Solutions. The Recognised Standard / www.cicm.com / October 2018 / PAGE 34
n 2.1 q East Midlands 2.5 q London 0.3 q North West 2.2 q Northern Ireland 0.9 q Scotland 2.5 q South East Top 2 Five q Prompter South Payers West -0.3 p Wales Top Five Prompter Payers Aug-18 Change from Jul-18 International Bodies 9.1 0.9 West Midlands Entertainment 13 3.2 Hospitality Yorkshire & 13.7 Humberside 3.7 Wholesale and retail trade 13.7 1.1 Agriculture, Forestry and Fishing 14.3 -1 q Region 2.2 1.8 q Sector Getting Better - Getting Worse Bottom 2 q Five Poorest East Anglia Payers Bottom Five Poorest Getting Payers Better Aug-18 Change from Jul-18 2.1 q East Midlands Energy Supply 21 4.8 Top Business 2.5 Five Prompter Admin q 2.5& Public London Support Payers Administration 20.4 3.9 IT and Comms 20.3 6.1 Region 1.5 Mining and Quarrying Business 0.3 from q Home North West Aug-18 20.2 Change 10.1from Jul-18 East Financial 2.2 Anglia and q 1Insurance Agriculture, Northern 13.1 Ireland 19.9 Forestry 2 0 and Fishing Yorkshire and Humberside 13.7 1.8 Northern 0.9 Ireland q Scotland13.8 2.2 Wales 14.1 -0.3 2.5 q South East South East 14.3 2.5 2 q South West -0.3 p Wales Bottom Five Poorest Payers 2.2 q West Midlands Region Aug-18 Change from Jul-18 1.8 q Yorkshire & Humberside Scotland 19.1 0.9 London 18.8 2.5 West Midlands 15.2 2.2 South West 14.8 2 tter - Getting Worse North West 14.8 0.3 East Anglia Top Five Prompter Payers East Midlands Top Five Prompter Payers London East Anglia 13.1 2 North Yorkshire West and Humberside 13.7 1.8 International Bodies 9.1 0.9 Northern Ireland 13.8 2.2 Entertainment 13 3.2 Northern Wales Ireland 14.1 -0.3 Hospitality Region South East 13.7 14.3 3.7 2.5 Wholesale Scotland retail trade 13.7 1.1 Agriculture, Forestry and Fishing 14.3 -1 South East Bottom Getting Five Better Poorest - Getting Payers Worse Bottom South Five West Poorest Payers 2 q East Anglia Wales Scotland 19.1 0.9 Energy Supply 2.1 q East Midlands 21 4.8 London 18.8 2.5 Business Admin & Support 20.4 3.9 West 2.5 Midlands IT and Comms q London15.2 2.2 20.3 6.1 South West 14.8 2 Business Yorkshire from 0.3 Home q & Humberside North West North West 20.2 14.8 10.1 0.3 Financial and Insurance 19.9 0 2.2 q Northern Ireland 0.9 q Scotland 2.5 q South East 2 q South West rompter -0.3 Payers p Wales 2.2 q West Midlands Aug-18 Change from Jul-18 1.8 q Yorkshire & Humberside Region Aug-18 Change from Jul-18 Top Five Prompter Payers Aug-18 Change from Jul-18 Region Aug-18 Change from Jul-18 Bottom Five Poorest Payers Aug-18 Change from Jul-18 13.1 2 d Humberside 13.7 1.8 land 13.8 2.2 14.1 -0.3 14.3 2.5 PAYMENT TRENDS Region Top Five Prompter Payers Top Five Prompter Payers Aug-18 Change from Jul-18 International Bodies 9.1 0.9 Entertainment 13 3.2 Hospitality 13.7 3.7 Wholesale and retail trade 13.7 1.1 Agriculture, Forestry and Fishing Northern 14.3 -1 Ireland 13.8 DBT North West Yorkshire & Humberside 14.8 DBT Bottom Five Poorest Payers Aug-18 Change 13.7 DBT from Jul-18 Bottom Five Poorest Payers Energy Supply 21 4.8 Business Admin & Support 20.4 3.9 IT and Comms 20.3 6.1 West Business from Home 20.2 10.1 Midlands Financial and Insurance Wales 19.9 15.2 0 DBT 14.1 DBT Getting Worse 10.1 7 6.3 6.1 4.8 Scotland Business from Home14.8 DBT 19.1 DBT Education Professional and Scientific IT and Comms Northern Energy Supply Northern Ireland 13.8 DBT Ireland 13.8 DBT Northern Ireland 13.8 DBT The Recognised Standard / www.cicm.com / October 2018 / PAGE 35 Scotland 19.1 DBT Wales 14.1 DBT Scotland 19.1 DBT Wales 14.1 DBT North West 14.8 DBT Scotland 19.1 DBT South North West 14.8 DBT DBT Wales 14.1 DBT South West North West 14.8 DBT South West 14.8 DBT Yorkshire & Humberside 13.7 DBT West Midlands 15.2 DBT London 18.8 DBT East Midlands 14.4 DBT London 18.8 DBT Yorkshire & Humberside 13.7 DBT West Midlands 15.2 DBT East Midlands 14.4 DBT Yorkshire & Humberside 13.7 DBT West Midlands 15.2 DBT London 18.8 DBT Sector East Midlands 14.4 DBT East Midlands 14.4 DBT London 18.8 DBT East Anglia 13.1 DBT South East 14.3 DBT East Anglia 13.1 DBT South East 14.3 DBT East Anglia 13.1 DBT South East 14.3 DBT East Anglia 13.1 DBT South East
Page 1 and 2: CREDIT MANAGEMENT CM THE CICM MAGAZ
Page 3 and 4: OCTOBER 2018 www.cicm.com 12 FROM T
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Credit Management October 2018

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