The truth behind the numbers – by Philip King FCICM
07 June 2018
Intrum recently published its European Payment Report 2018. The report can be viewed here and, as as in previous years, it contains some interesting insights. There are a few statistics that stand out to me.
62% of respondents cite financial difficulties as a main cause of late payment, 45% cite inefficiency, and 48% believe intentional late payment to be the primary reason.
46% say they’ve been asked to accept longer payment terms than they feel comfortable with but that figure is down from 61% in 2017.
In protecting against bad payment, 56% of large companies undertake credit checks, and 44% utilise third party debt collection services, while the comparative figures for small companies are just 24% and 20%.
From UK respondents, the average time to pay for B2B customers is 27 days, up one day from 2017.
The report is well worth a read, particularly if you’re trading across Europe and want to benchmark your experience against others.
All of this leads me to draw some conclusions. The plethora of late payment statistics with which we’re regularly bombarded isn’t helpful because it’s impossible to know what the true position is.
Cashflow problems are a bigger issue than inefficiency and deliberate late payment but, where those cashflow issues are a result of late payments received down the supply chain, then it comes as no surprise. Interestingly, though, deliberate late payment isn’t the overwhelming problem we’re often led to believe, nor is it the only problem.
The number of cases where longer payment terms are being demanded has declined and again flies in the face of what we’re frequently told.
The low number of small businesses carrying out credit checks or using the services of a third party is worrying since it contributes to the problem by default. You’d expect me to attribute the better practice of larger companies to the fact that they employ credit professionals who are often CICM members so I shan’t disappoint. Good credit professionals make a real difference and we have to work harder at educating small businesses with the basics of credit management practice.
Payment times from respondents in the UK have not markedly declined over the past year.
This won’t come as a shock, but it’s useful data to add to the other information out there and is a reminder of how important our efforts to drive genuine and cultural change are.