Time is money

New research shows British businesses are paying their bills two days earlier - but still fifteen days later than expected

Time is money

Such is the fragility of the economy nowadays, it seems that people are finding anything they can upon which to hang their hopes of recovery.

However, far be it from us to dismiss new research which looks to provide a little bit of light at the end of the proverbial economic tunnel. We therefore offer a lukewarm welcome to the assertion of commercial information and business insight firm Dun & Bradstreet (D&B) that many businesses have adapted to operating in today’s sluggish economy and are managing their cash flow more confidently.

This is based on a new report, published today by D&B, which reveals that the average time taken by British businesses to pay bills has improved by two days throughout 2012 to an average of fifteen-days late against agreed payment terms.

The new figures coincide with the recently updated EU Payments Directive, which aims to make it easier for businesses to pursue payment, with debtors being forced to incur interest and pay an administration fee if they fail to pay for goods and services within 60 days. 

British businesses have steadily been paying their bills later in recent years, explains D&B, from thirteen days late in 2006, peaking at seventeen days in 2011. The average fifteen-day late payment times for British businesses over the past year are similar to that of France, Spain and Italy. This is nine days slower than Germany, which has the shortest average payment period of the nine countries surveyed by D&B as part of its study. But some solace can still be found in the fact that the payment period in Portugal is seven days longer than the UK.

And in general, payment performance across all UK sectors improved moderately over the past year with the exception of the retail sector, where payment time increased substantially to nineteen days during 2012. D&B says this is a result of the slow improvement of the retail sector during the past year.

Corinne Saunders, president of Dun and Bradstreet Europe & Worldwide Network, said: “Whilst we’re unlikely to see an increase in litigation as a result of the updated Payments Directive, it should encourage businesses to take a fresh look at their payment behaviour and that of their customers. It will also put pressure on large businesses in sectors where extended payment terms have been used as a means to protect margins, often putting smaller suppliers under increasing pressure.”

Finally, D&B suggests three key steps to help businesses manage payments effectively:

  • Actively monitor payment activity to improve cash flow, which is increasingly  important at a time when credit is more difficult to secure in a post-recession economy

  • Frequently review payment behaviour across the customer base to take advantages of opportunities to reduce risk by addressing the subject of delayed payments or tightening terms and conditions of contracts on renewal; and

  • For exporters, make active use of information on payment behaviours outside the UK to customize terms to new customers in order to protect against unnecessary risk.

Following these wouldn’t be the worst idea in the world for our start-ups and SMEs. In the meantime, we eagerly await more snippets of what could be regarded as good news…. 

Adam Pescod
Adam Pescod

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