Are UK finance bosses ‘in denial’ about payment performance?

Despite there being a well-reported chronic problem in the UK with late supplier payments, new research identifies that many finance bosses are in denial.

The research, released by automated accounts payable and document management software provider, Invu, shows that 78% of finance decision-makers believe their company’s payment performance is either “excellent” or “good”.

This is a sharp turnaround from similar research carried out just two years ago where 60% of UK finance decision-makers reported that their company struggled to pay suppliers on time. A further 20% stated that late payments were a “significant problem” for their business.

The perception is that large companies are often criticised for poor payment practices, and in the research report – Perception vs Reality – the real state of Accounts Payable and Purchase Order Processing in UK business – the reality is that large businesses do perform slightly worse than medium business.

  • A quarter (25%) of large companies rate their payment performance as average to poor – a large drop from 64% in 2018.
  • 19% of medium companies rate their payment performance as average to poor – another descent from 57% in 2018.

Ian Smith, General Manager of Invu said, “The gap between the financial decision-makers perceived improvement in payment practices, and the reality suggested in the data available is concerning. Recognising there is a problem is always the first step towards a solution.”

The perceived improvement identified in both the medium and large businesses does not appear to reflect reality.

Back in 2018, The Federation of Small Businesses identified that around 50,000 small firms fail every year waiting for late payments from clients, at an estimated cost to the economy nearing £2.5bn.

Government statistics provided via large businesses following the “Reporting on Payment Practices and Performance Regulation” (PPR) show that late payments have increased, with an average of 31% of supplier invoices now paid late compared to 29% three years ago.

Smith continues, “Being in control and able to pay on time, contrasted with being a victim of inefficient processing that results in late payments, is at the heart of whether the late payment problem is an issue of attitude, or performance. However, being prepared to make the investment required to be in control is always down to attitude.

“The denial identified in the research suggests that complacency has a role to play here. The standard of what constitutes good payment practice appears to have slipped.”

Other highlights from the research include:

Supplier relationships can be strained:

  • One in five (22%) rate their own company’s payment performance between “average and poor”.
  • Two thirds (67%) of UK finance decision-makers said their team has to chase suppliers to request copies of supplier invoices. 19% label it is a serious and consistent problem.
  • 43% of finance decision-makers say finance teams have no real-time visibility over supplier invoices in the accounts payable process. Only 8% say they have visibility only once it’s in the Accounts Payable ledger.