Fighting back against late payment culture

The culture of late payments
The culture of late payments

There's a fine line between being fashionably late and being disrespectfully late, in both business and pleasure. But in the business world, the line that separates what's acceptable from what's potentially damaging to an organisation is extremely fine.

The European Payment Report

2015<> reveals that the debt Europe's businesses have to write off due to business partners failing to pay amounts to 3.1 per cent of their total revenues; or 289 billion Euros of lost money annually.

The negative effects of late payment are far reaching: an overwhelming 40 per cent of European businesses claimed that their customers' inability to pay on time is hindering growth. Every third company stated that faster payments from customers would enable them to hire new employees, while every fourth company made a connection between late payments and the need to lay off staff.

The reasons behind delayed payments are manifold, but from the perspective of six out of ten businesses, debtors delay payments and make businesses wait for their money as part of a deliberate strategy. This is especially worrying for small businesses that often don't have luxury of a dedicated finance department to continually process a large number of invoices and chase for payment, which can prevent a clear view of cash flow.

Automating the purchase to pay (P2P) process can be a cost and resource-effective solution to this problem. Not having to manually request, purchase, receive, pay for and account for various goods and services takes away the administrative burden and provides business owners with a clear understanding of when and how much money is coming in, what is going out and how much is left for investments.

Together with the European Commission's upcoming Late Payment Directive<>, equipping businesses with the legal weaponry to fight against late payment culture, automation technology can provide businesses with the appropriate tools to manage their cash flow internally. That way, late payments will soon be a thing of extreme circumstance, and not a regular bad habit.

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