How do businesses overcome the issue of late invoice payments?
Late payments remain one of the biggest challenges for businesses. Smaller and independent organisations help underpin the UK economy and rely heavily on a steady stream of revenue coming in every month – helped in no small part by the speedy, accurate processing of invoices.
New data suggests invoices aren’t being paid on time, or even at all. Late payments for small businesses in the UK have hit a two-year high, with calls for tougher punishments and tighter regulations for companies that continue to pay late.
And with a recession currently hitting the UK economy, paying invoices isn’t just polite, it’s critical for businesses to keep their heads above stormy waters.
Yet the issue of late payments refuses to go away. A recent survey of 200 UK finance leaders found that 35% paid vendors late due to manual accounts payable systems, with slow processes (45%), administrative errors (45%), and having to validate invoices (37%) the biggest reasons for doing so.
What’s causing late payments?
While it might be just a small percentage of rogue businesses that continue to pay late, it still has a large impact. 40% of UK businesses said they are constantly under pressure because of late payments. This is a reduction of around 7% over 10 years, but each business was owed an average of £22,000.
Despite tools that can automate and streamline payments, there are still accounting and finance departments out there that are using manual processes and Excel spreadsheets to manage their finances. One small mistake can lead to days or weeks’ worth of delays, adding to the already huge pressure businesses are currently under.
The impact of remote, hybrid, and home working has also disrupted traditional working practices. 47% of finance leaders said the change in the working environment had affected their ability to process invoices on time, with many lacking the ability to see and manage payments outside of the office.
Overall, a lack of new tech investment has led to finance teams being under-equipped to deal with the speed of modern-day processes. The finance team needs to work like a well-oiled machine, but without the proper tools, work is more likely to grind to a halt.
A helping hand
Speaking on the lack of automation within UK finance, Becki Roberts, national head of cloud accounting at UHY Hacker Young, said: “Anywhere where we’re doing things over and over again, there’s an opportunity for some of that human element to be taken out of it. Then there’s your bottom line. If you’re paying qualified, intelligent people to do processes that they don’t need to be doing, that’s going to have a massive impact on your profit.”
And she’s right. Right now, there are too many accounting and finance professionals spending valuable amounts of their time on repetitive tasks that could be done faster and more accurately than humans on a day-to-day basis.
Automation within finance is growing, but seemingly not fast enough. In June 2021, 20% of organisations across all sectors had adopted automation, increasing from 13% in 2020. And, with 94% of Deloitte’s Q4 2021 Global CFO Survey expecting their company’s investment in digital technology to increase, this figure is only expected to rise.
By removing the need for staff to spend hours digging through invoices or entering data into Excel spreadsheets, and instead having them foster better supplier relationships or critical reporting tasks, we can realise benefits to the bottom line while reshaping the traditional role of accounts payable.
Solving the late payments issue
Could the issue of late payments be a thing of the past if end-to-end automation was embraced across all businesses? It’s too hard to say for definite, but it would certainly benefit relationships with suppliers and vendors.
Plus, we’re already seeing an improvement. The time taken to process and approve vendor invoices has decreased by 37% and 45% respectively over the past 12 months according to the research, leading to suggestions that businesses are finally overcoming the issue of late payments.
The role of accounts payable in helping process on-time payments cannot be understated. No one else within a business has the experience and view on cash flow and forecasting than AP staff. By allowing automation to handle and manage invoices, we can free up their time and skills to be focused on the tasks that matter, safeguarding businesses against the issue of late payments.
Laurent Charpentier, CEO at Yooz