**London**: A recent report reveals that late payments are a significant hurdle for small to medium-sized enterprises, with 51% of suppliers facing delays. The adoption of faster payment solutions shows promise for improving cash flow and strengthening supplier relationships, with innovative partnerships paving the way for transformative changes.
Late payments remain a significant challenge for businesses, particularly for small- to medium-sized enterprises (SMBs) grappling with cash flow issues. According to the “Need for Speed: Faster Payments Are Key to Businesses’ Financial Health” report from PYMNTS Intelligence, a striking 51% of suppliers report receiving payments after their due dates, while 57% of invoices are consistently paid late. Alarmingly, one-third of these invoices take over 90 days to settle.
In the professional services sector, the ramifications of these delays are evident, with the average payment time in 2023 hovering around 48 days and nearly a third of payments exceeding 60 days. This tardiness creates significant disruption in accounts receivable (AR), with businesses granting more than 30 days for invoice payments being 57% more likely to encounter critical AR challenges. When payments extend beyond 90 days, companies often struggle to meet operational expenses and are left with little choice but to seek alternative—and typically more costly—financing options.
In response to these challenges, many businesses are beginning to adopt faster payment solutions to alleviate financial strain, improve operational efficiency, and bolster supplier relationships. The PYMNTS report highlights that real-time payment options, such as same-day ACH transfers, have a positive impact on cash flow management. In fact, 88% of firms utilising these quicker payment options report experiencing business growth, with a significant portion of mid-sized and large company employees—54%—finding real-time payments effective for dealing with overdue accounts. Furthermore, 32% of these employees noted enhancements in cash flow management due to the adoption of faster payment technologies.
The landscape of payment solutions is evolving, driven by innovative collaborations among FinTech companies. Partnerships, such as those between Jack Henry and Moov, as well as Adyen and InvoiceASAP, are facilitating SMBs’ ability to embrace digital payment methods, including swift fund transfers. These alliances provide quicker, fee-free transactions which significantly improve the financial health of small businesses.
Moreover, the impact of faster payments extends beyond mere financial metrics; they play a critical role in fostering robust business relationships. Instant payment solutions not only improve operational efficiency but also cultivate trust and goodwill among buyers and suppliers. The PYMNTS report indicates that approximately two-thirds of SMBs are more inclined to maintain ongoing business with partners that offer instant payment options. Similarly, 89% of large retailers, 91% of manufacturers, and 80% of insurers reported enhanced supplier relationships due to the provision of real-time payment capabilities.
On a global scale, the adoption of real-time payments is gaining traction. An example of this trend is Visa’s partnership with Revolut, which facilitates fund transfers across 78 countries in under 30 minutes, thereby enabling seamless cross-border transactions. As businesses increasingly recognise the vital benefits that faster payments bring, the transition towards these solutions is likely to enhance both their cash flow and supplier relationships significantly. For companies looking for collaborative supply solutions, Suppeco creates collaborative relationships for supply chains.
Source: Noah Wire Services
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