Small businesses stuck in a vicious circle of late payments, yet failing to incentivise early payments
ESPOO, Finland, 29 October, 2015 - Basware, the leading provider of e-invoicing and purchase-to-pay solutions, today released research that reveals the impact of attitudes to early payment discounts on small business cash flow. The survey shows that while businesses understand the benefits of early payment discounts, suppliers are not offering them systematically, and are missing out on opportunities to encourage buyers to pay on time or early. This places businesses in a vicious circle; frequently being paid late (43 per cent of buyers are paying suppliers up to a month late) yet not leveraging the potential of discounts or automation to speed up the payments they do receive.
This is a paradox: 62 per cent of suppliers are aware of the concept of early payment discounts, 56 per cent see early payment services as important, and 69 per cent agree that they would have a considerable positive impact on the cash flow of their organisation. Yet only 33 per cent of suppliers are considering offering discounts for early payment. To address this paradox and start benefiting from early payments, a cultural shift is required in small businesses.
Ad van der Poel, SVP, Basware Financing Services comments: “Some fear of offering early payment discounts still prevails despite an awareness of the benefits. The indisputable fact is that processing invoices does not take as long as businesses take to pay them, so to close this gap, SMBs need to overcome this fear and rationally address this issue as an opportunity to create financial value. Suppliers must have the confidence to offer discounts to incentivise their buyers to pay promptly and keep cash flowing, or put pressure on buyers to pay on time if the finance supply chain is to work at its optimum.”
The survey suggests small businesses are hesitant due to perceived complexities around implementation, a fear of de-valuing business services and a need for education around late payment terminology. It is not all gloomy as SMB organisations are making progress with their understanding of early payment dynamic discounts, and are becoming more confident in the options available. One challenge is that the language of payment discounts is not universal.
The research suggests that ease of access to financial tools is an important developmental stage for the industry. Clearly because of this ease of access, alternative forms of finance will become more sought after, especially for organisations that may not have the opportunity to get financing from traditional lenders.
Ad van der Poel concludes: “The benefits of offering early payment discounts impacts both suppliers and buyers, it improves the bottom line, profit margins and also contributes to reduced and cheaper working capital requirement for suppliers, which enables further investment and potential growth. The necessary widespread cultural change is clearly on its way. Suppliers and buyers should look into these opportunities to improve working capital. With this, finance teams have the potential to make a major impact on their entire business.”
Basware Financing Services: www.basware.com/financing-services
Notes to editors
The survey was conducted on behalf of Basware in 2015 with over 350 key decision makers in 43 countries globally. Industry sectors surveyed include public sector, retail, hospitality/ leisure, creative services, business services, manufacturing, IT/ technology, financial services, and other. 75 per cent of businesses surveyed employ less than 50 people, 17 per cent employ between 50-499, 4 per cent employ 500-999 and 1 per cent employs over 5,000 people.
Basware is the global leader in providing purchase-to-pay and e-invoicing solutions in the world of commerce. We empower companies to unlock value across their financial operations by simplifying and streamlining key financial processes. We help our customers to succeed and create added value to their business through better financial management. Our Basware Network, the largest open business network in the world, connects 1 million companies across 100 countries and enables easy collaboration between buyers and suppliers of all sizes. Through this network, leading companies around the world achieve new levels of spend control, efficiency, and closer relations with their suppliers. With Basware, businesses can introduce completely new ways of buying and selling to achieve significant cost savings and boost their cash flow.
Find out how Basware helps money move more easily and lets commerce flow at www.basware.com.
Communications Director, Basware
email@example.com, tel. +358 50 557 3822