Treasury Today Country Profiles in association with Citi

Delayed payments lead to lost revenue say nearly 20% of businesses

Alarm close minute hand tied to nail in the ground, delay concept

A new survey measures the cost of payment delays in the Americas.

Payment delays are rife in the Americas. Indeed, 90% of businesses cite frequently receiving late payments from B2B customers.

This is resulting in some companies needing to correct cash flow, suspend payments to suppliers, and, in extreme cases, book revenue losses.

The data comes from a new study by credit insurers, Atradius, which surveyed over 800 companies in Brazil, Canada, Mexico and the US, to discover the payment practices of their B2B customers.

Marginal improvement

90% of businesses claiming to have received late payments is a marginal improvement on 2017, when 91% made the same claim. On a country-by-country basis, Mexico and the US have the highest percentage of respondents citing frequent late payments from customers.

Yet despite the slight decrease in the number of overall delayed payments, the proportion of overdue B2B invoices in the Americas increased from 49% in 2017 to 50% this year.

Businesses cite multiple reasons for this. When trading domestically, the most common reason for late payment is that the customer has insufficient funds. Many companies also use outstanding invoices as a means of financing. When trading cross-border, the main reason for paying late is down to the complexity of the payment procedure.

Some businesses also freely admit to delayed payments to free up cash internally. Stanley Black & Decker, for example, freed up nearly US$500m worth of working capital by delaying payments over recent years, according to the Wall Street Journal.

Negative impact

The impact of these late payments on businesses vary. The majority (40%) said these didn’t have a significant impact on their business. This is likely due to them having a strong cash flow and/or provisions in place for late payments.

Some businesses, however, reported more worrying impacts of late payment. Twenty two percent, for instance, said they needed to take special measures to correct cash flow. This may include taking out short-term loans, which are becoming increasingly costly in a rising rate environment.

Other respondents (20%) said they had to delay payments to suppliers due to being paid late, highlighting the impact late payments have on the downstream supply chain.

Concerningly, 18% of businesses reported suffering revenue losses because of late payments. If margins are tight, this could be fatal.

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