The proportion of global suppliers affected by late payments has risen dramatically in the past two years, Taulia research shows, with a growing number of firms reporting delays of more than 45 days.
In its latest Supplier Sentiment Survey, working capital solutions provider Taulia finds over half of the 11,300 companies it polled in November 2023 were typically paid late by their buyers.
“More suppliers than ever before [are] experiencing late payments,” says Taulia in an accompanying report, which notes that 51% of firms on average are paid after the invoice due date.
This was a minor increase from 50% the year prior, yet a marked growth from 36% in 2021, the data shows.
“The global pandemic changed behaviour significantly,” says Bob Glotfelty, chief growth officer at Taulia, who notes early payments leapt during the Covid-19 crisis as buyers worked to help suppliers manage the distortions in the global trading environment.
“Since then, late payments have been on the rise. Assuming no major global events this year, unfortunately, I would expect 2024 to see marginally worse late payment behaviour,” he tells GTR.
Responding to Taulia’s annual survey, just 3% of companies said on average they are paid before the invoice due date, while 44% reported being paid on time.
Reports of buyers paying more than 45 days late have been “creeping up” in recent years from 3% in 2019 to 8% last year, the “highest level” recorded since the survey began, Taulia says.
Chemicals and machinery were the two worst affected sectors, with nearly 60% of firms in these industries reporting on average their invoices were paid more than 30 days late, Taulia data shows.
Italy was the market with the highest rate of late payments, with 67% of firms reporting they were generally paid late, although Glotfelty tells GTR that this is “an expected outcome” as delays are a “market norm”.
Other countries vulnerable to late payment issues in 2023 were Argentina and Singapore, Taulia data shows, where respectively 64% and 61% of suppliers documented delays of longer than 30 days.
“In any business environment, late payments can place a significant strain on suppliers’ cash flow and working capital,” Taulia says.
“[But] in a higher inflationary environment, the challenge presented by late payments is even more significant. If an invoice is paid months late, the value of the funds received will be less than when the invoice was issued.”
Taulia’s report comes amid a darkening outlook for global trade, as importers and exporters battle delivery delays, elevated shipping costs and working capital constraints caused by the Red Sea crisis.
In February, the British Chambers of Commerce (BCC) said some of its members had reported cost rises of 300% for container hire as well as delivery delays of up to three or four weeks.
“[This is] creating knock-on effects such as cashflow difficulties and component shortages,” it said.
Last month, insurer Allianz Trade said companies are becoming “more and more concerned” by the threat of non-payment, with its index for measuring such risks at its highest level since 2022.
In its Global Insolvency report, published in late February, the insurer found global bankruptcies grew by 29% year-on-year in 2023, the fastest momentum since the 12 months following the global financial crash.
Bankruptcies are set to rise by a further 9% in 2024 due to slowing economic growth, trade disruptions and geopolitical uncertainty, it added.
Policymakers are deliberating ways to encourage prompter payments from buyers. The EU announced a series of draft reforms to its existing Late Payment Directive in September 2023.
Under the proposals, the EU would limit payment terms to a maximum of 30 days and charge buyer companies guilty of late payments interest of 8% on the invoice and a flat fee of €50.
Still, there are fears such changes could make it unviable for banks to support supply chain finance facilities and may result in smaller suppliers losing business with larger buyer customers.
SOURCE: GTR Global Trade Review
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