Almost two thirds of European suppliers say late payments put them at financial risk

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Research from Ivalua, a leading global spend management cloud provider, has revealed almost two thirds (65%) of suppliers feel late payments are putting their company at financial risk. As COVID-19 has heightened financial pressures, 60% of suppliers say they have been asked by customers to extend their payment terms in the last 12 months, yet almost a third (30%) say late payments had increased.

The research, conducted by Coleman Parkes, surveyed 300 suppliers across the UK, France, Germany and Switzerland, to examine supplier relationships with their buyers. The findings show late payments are having a knock-on effect across the supply chain. As a result, suppliers say they have had to extend or open lines of credit otherwise not needed (41%), delay delivery of products or services (34%), and increase prices or reduce discounts (33%).

In the UK, the government has toughened up its Prompt Payments code as part of a crackdown on delayed invoice payments. But more than a quarter (26%) of UK suppliers believe this won’t improve delinquency rates.

“Even in tough times, organisations must build strong supplier relationships so they can tap into supplier innovation and minimise risk of supply disruptions. Improving visibility and timeliness of payments is the single most impactful way to help organisations become a supplier of choice,” commented Alex Saric, smart procurement expert at Ivalua. “Organisations must modernise procurement tools to enable on time payments and give suppliers the visibility needed, thereby bolstering relationships.”

Despite the opportunities presented by strong supplier relations, the research found 89% of suppliers feel pressured to reduce costs beyond what is reasonable. This is impacting collaboration, as almost six in ten (59%) suppliers say price pressure impacts willingness to share innovations.

According to the report, two-thirds (67%) of suppliers find buyer procurement systems a challenge to use, further limiting their ability to collaborate with organisations. The biggest barriers were access costs (40%), difficult to use systems (38%), and difficulty sharing information (34%).

“To drive efficient and scalable collaboration, organisations must take a smart approach to procurement that removes barriers to cooperation, improving visibility and giving suppliers the tools they need to share insights easily,” concludes Saric. “Only then will organisations be able to work with suppliers to innovate, reduce supply chain risk, and restore financial growth – ultimately gaining the advantage over competitors.”

 

To download the Ivalua 2021 Supplier Relationships Report, “Cost versus collaboration – how delayed payments and a focus on cost is limiting supplier relationships”, please visit: https://info.ivalua.com/supplier_relationship/cost_versus_collaboration_report