Thursday, January 4, 2018

Business Finance Group Reveals Payment Problems in Shipping, Road Haulage and Freight Forwarding

UK Transport Sector is the Slowest Payer of Any Industry
Shipping News Feature
UK – MarketInvoice, which provides a range of financial products from its London and Manchester based offices, has come up with a new study, the results of which will come as little surprise to those operating throughout the shipping, freight forwarding and road haulage sectors. The conclusion of looking at some 80,000 invoices as they are processed is that the transport industry is at the bottom of the heap when it comes to settling its bills, a result of which is damage being caused to the very people who cannot afford it, small and medium enterprises (SMEs).

The study reveals that a culture of late payment to UK SMEs is undermining their growth and the value they bring to the UK economy. The transport sector takes the longest to settle its debts with SMEs, taking (on average) 25 days beyond terms. Also, 62% of invoices, typically worth £18,560, to the transport sector are paid late to SMEs.

Findings from the business finance company reveal that, overall, 62% of invoices issued by UK SMEs in 2017 (worth over £21 billion) were paid late, up from 60% in 2016. The average value of these invoices was £51,826 and three in ten invoices paid late took longer than two weeks from the agreed date to settle, with some taking almost 6 months to be paid. The research analysed which sectors, UK regions and countries were the worst late payers to UK SMEs.

Whilst at a 25 day credit overrun, transport companies took the longest to pay, other sectors that frequently pay late included the food & beverage industry (83%), energy businesses (80%) and wholesalers (79%). As to regional differences MarketInvoice discovered businesses in Northern Ireland, taking the mantle from Yorkshire in 2016, were found to be the worst late payers with 93% of invoices paid late. East Anglia (68%) and East Midlands (66%) came in second and third respectively. Scotland, defying national stereotype, was the best of the worst, where half (53%) of invoices were settled late.

While UK companies (66%) often pay invoices late, those in the USA (71%) and continental Europe (73%) are even more likely to delay payment. However, the UK still takes twice as long (18 days) to pay UK suppliers than counterparts in Europe (9 days). Bilal Mahmood, MarketInvoice spokesperson commented:

“A bad situation is getting worse. The problem is being compounded by 90-day payment terms demanded by larger organisations, which are becoming more common. When certain industries do miss the due date of an invoice, they tend to miss it by some margin. The Transport sector takes, on average, the longest time to pay. These, typically, tend to be logistics and distributions businesses and so potentially are impacted by further delays in their supply chain. SMEs need to understand what measures they can take to reduce the risk, such as making T&C’s clear from the outset, chasing payments down and enforcing the right to claim compensation from late payments.

“We look forward to how the Duty To Report measures [which requires large businesses to report on invoice payments twice yearly] that came in to force earlier this year will play out. This is not about naming and shaming but encouraging positive behaviours at big business. SME owners respect long payment terms, but late payments are inexcusable. For every day an invoice is late, it’s more time spent chasing payment. This means less time for business owners to focus on growing their business, creating innovative ideas and hiring more people. Things need to change quickly.

“We want the UK to be the best place in the world to start and grow a business, but the UK’s small-to-medium-sized businesses are hampered by overdue payments. Such unfair payment practices impact a business’s ability to invest in growth and have no place in an economy that works for everyone.”

Under the ‘Duty to Report Payment, Practices and Performance’ many larger companies must now reveal the required payment data every six months. Companies affected include those established for two years or more with a turnover of more than £36 million a year although precise details must be entered into the government link to establish individual liability.