Paying their suppliers on time is a big issue for many small businesses and hinders economic growth. According to the Tungsten Network’s report, as much as 47% of companies admit to making late payments. Read on to learn what causes these delays.
The biggest issues: slow internal processes and a lack of automation
The Tungsten Network surveyed over 400 P2P (Procure to Pay) professionals to learn more about the most common sources of issues that make their jobs more difficult. The survey revealed that 1 in 10 payments happen after the deadline specified in the the agreed payment terms, which is typically 30 to 60 days (a.k.a Net 30 or Net 60).
To make things even worse, 16% of companies said that a fifth of their payments are never on time. Interestingly, one in 12 businesses admits to not even monitoring payment processes.
64% of respondents said that late payments are caused by slow internal processes, while for 39% the biggest problem was the lack of automation. Others pointed at administrative errors (27%), insufficient team capacity (20%), and problems with managing cash flows (16%).
Too many paper invoices and missing POs the most annoying problems
Based on the survey, the Tungsten Network put together The Friction Index which can be used as an indicator of how much time and money companies lose due to inefficient payment processes.
The survey also contained more general questions about the irritants faced by P2P professionals. The most annoying aspects of their work, according to the survey, were:
- High proportion of paper invoices received (49%)
- Too many non-PO based invoices (48%)
- High volume of supplier enquiries regarding invoice or payment status (47%)
- Lack of automated exceptions (43%)
- Lack of automated approval (43%)
According to arbitrue’s research on the most recent cloud accounting statistics, as much as 60-85% of invoices issued in the UK are on paper. In other European countries this figure is even higher at 85% or more.
Given that matching Purchase Orders (POs) is an important step in a typical invoice processing workflow, improvements to how these processes are carried out would surely save companies a lot of time and money.
Source: Tungsten’s Report (PDF)