1 in 10 invoices paid late, impacting
Small & Medium businesses to the tune of $3 trillion
globally
An economic report published today by Sage reveals the detrimental
impacts of late payments on Small & Medium Businesses,
currently equating to $3 trillion globally. With one in 10 invoices
failing to be paid on time, the study reports up to eight percent
of payments are either never paid or paid so late that businesses
are forced to write them off as bad debt.
‘Late Payments: The Domino Effect’ highlights that almost 40
percent of Small & Medium Businesses in Canada experience
direct negative impacts from late payments. As a consequence of
late payments, 13 percent say they struggle to pay bonuses around
the festive period, and 12 percent say they experience difficulties
with paying suppliers.
Other common impacts across the 11 countries analyzed include
delaying investment into the company (14 percent for Canada), and
impeding the ability to pay its own suppliers in turn (12 percent
for Canada), creating a vicious cycle.
However, when looking at the reasons why Small & Medium
Businesses don’t chase payments, the overwhelming response from 31
percent of those surveyed in Canada is to protect client
relationships, indicating that there is a stigma around chasing
payments.
Paul Struthers, Executive Vice President & Managing Director
of Canada at Sage, said, “Almost 40 percent of SMEs contribute to
55 percent of total GDP in Canada. This is a very substantial part
of the economy that relies on low cash reserves to operate, and
delays to income can have substantial impacts on growth and
operations.”
“We need the culture around late payments to change, so that
small businesses can get on with doing what they love—running their
business—rather than worrying about when the money will come in. In
2017, it is simply unacceptable for 18 percent of all payments paid
to Small and Medium businesses to be paid late.”
Undertaken by Plum Consulting, the research analyzed responses
from over 3,000 business builders to look at the effects of late
payments on Small & Medium businesses. It highlights
significant implications for our entrepreneurs and their ability to
operate, plan and grow.
The results underscore that the Canadian economy, as a whole,
could benefit from any improvement in the operational efficiency of
SMEs, as this would enable Canada to become more competitive
internationally and increase the country’s growth prospects. In
Canada, a significant percentage of companies with which SMEs enter
into a commercial transaction pay for their products or services
late—at least 10 percent of all payments to SMEs are coming in late
according to survey results. This corresponds to 10 percent of all
invoices.
Because of their size, SMEs have fewer financial resources they
can utilize in the event of unexpected shocks—making them
particularly vulnerable to cash flow problems. Receiving late
payments from other companies was found to be one of the leading
causes of cash flow problems for SMEs and something that could
adversely affect the companies’ future growth and productivity.
The silver lining? The problem of late payments may be easily
remedied. Respondents shared that ‘no reason’ is most often given
as the reason for a payer company making their payments late. This
highlights that mandating a stricter payment schedule may help
reduce the number of late payments to SMEs in Canada.
Global snapshot: Late Payments Landscape – The Domino
Effect
Across the 11 countries analysed Small & Medium Businesses
account for at least 96 percent of total enterprise, ‘protecting
client relationships’ is the most cited reason for not chasing late
payments – leading Sage to call for a fundamental shift in culture
for Small and Medium business to be proud to chase for work
undertaken.
Country |
Proportionof invoicesthat are paidlate (%) |
Average numberof days per yearspent by SMEschasing up
latepayments |
Top barrier to chaselate payments forSMEs in each
country |
Proportion ofinvoices thatbecome baddebt (%) |
UK |
18 |
15 |
Protect client relationship (40%) |
9 |
South Africa |
15 |
20 |
Protect client relationship (40%) |
9 |
France |
11 |
6 |
Protect client relationship (21%) |
8 |
Ireland |
15 |
7 |
Protect client relationship (43%) |
8 |
Australia |
9 |
5 |
Protect client relationship (29%) |
7 |
Brazil |
7 |
14 |
Protect client relationship (35%) |
7 |
Canada |
10 |
7 |
Protect client relationship (31%) |
8 |
Singapore |
18 |
15 |
Protect client relationship (41%) |
9 |
Spain |
12 |
18 |
Protect client relationship (37%) |
8 |
United States |
13 |
15 |
Protect client relationship (32%) |
10 |
Germany |
9 |
5 |
Protect client relationship (31%) |
8 |
Tim Miller, Partner at Plum Consulting, said, “losing the
cultural stigma of chasing late payments is crucial to escaping the
domino effect—all the time that SMEs are worrying about chasing
late payments, their own suppliers will be paid late, and the cycle
will continue. SMEs are more likely to trade with other SMEs,
meaning this will disproportionally affect smaller
companies. An automatic system to send reminders for unpaid
bills may get over the cultural aversion—and could also overcome
the lack of staff and resources that some SMEs cite as reasons for
not chasing late payments.”
METHODOLOGY
This research was conducted by FTI Consulting’s Strategy
Consulting & Research team from 21st July–4th August 2017,
involving n=3,028 SME respondents across 11 countries, who are
either fully involved in or knowledgeable of the decision making in
their organisation.
The country specific breakdown is as follows:
- United Kingdom: n=280;
- South Africa: n=271;
- France: n=277;
- Republic of Ireland: n=289;
- Australia: n=278;
- Brazil: n=270;
- Canada: n=278;
- Singapore: n=255;
- Spain: n=276;
- United States of America: n=282;
- Germany: n=272.
Please note that the standard convention for rounding has been
applied and consequently some totals do not add up to 100%. Further
information on the results and methodology can be obtained by
emailing dan.healy@fticonsulting.com.
Media contact:
Betty Tian, Sage Office: 604-207-3611 Mobile: 604-376-7398
Betty.Tian@Sage.com
About Sage
Sage (FTSE:SGE) is the global market leader for technology that
helps businesses of all sizes manage everything from money to
people – whether they’re a start-up, scale-up or enterprise. We do
this through Sage Business Cloud - the one and only business
management solution that customers will ever need, comprising
Accounting, Financials, Enterprise Management, People & Payroll
and Payments & Banking.
Our mission is to free business builders from the burden of
admin, so they can spend more time doing what they love – and we do
that every day for three million customers across 23 countries,
through our 13000 colleagues and a network of accountants and
partners. We are committed to doing business the right way, and
giving back to our communities through Sage Foundation.
Find out more at www.sage.com/ca.
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