Invoices and trade payment data is a hot topic on a regular basis within the financial world with a focus on how soon companies are paying their bills. We hear monthly updates of how businesses are failing because they aren’t getting paid on time; just recently the supermarket scandal hit the press which highlighted supermarket giants for paying their suppliers late. Unfortunately it’s not surprising that last year more invoices were paid late than on time.
Here are four key facts about invoices and how they were paid in 2015:
• More businesses were paid later in the first two quarters of the year than the last two
Quarter one of 2015 saw 62% of invoices being paid late, and Quarter 2 saw 67% of invoices being paid late. Quarters three and four followed closely behind with over half the amount of invoices during the quarters were still being paid late, with Quarter 3 coming in at 51% and Quarter 4 coming in at 53%. Whether the improvement towards the latter half of the year and the difference to the quarter one figure reflects companies’ financial year ends is unclear.
• Wales was the slowest paying region throughout 2015 with businesses within Wales paying their bills on average 19 days beyond agreed terms
Days beyond terms (DBT) indicates how long after the agreed term a company pays their bills. For example, if the agreed term of an invoice is 30 days, and the company pays the bill in 40 days, they have an average DBT of 10. Wales was the slowest paying region with a 19 DBT average, followed closely by Greater London and the West Midlands who both had an average DBT of 18. Regions towards the North of England proved to be the best payers, with the North East, North West and Yorkshire all paying their bills on average 16 days beyond terms, which was the fastest in the UK last year.
• Construction wasn’t the worst paying sector in 2015
The education sector paid its bills on average 11 days beyond terms in 2015. Education was closely followed by the health and social sector and IT & communications with an average DBT of 12 and 13 respectively. Surprisingly, construction came second in the worst paying sectors even after the bad press and negative stigma surrounding the struggling industry. The energy supply sector actually takes longer to pay than the construction industry, with an average of 29 days beyond terms compared to construction’s 21 days.
• Larger bills are paid quicker than small ones
A surprising fact about invoices and bad news for SMEs is that larger bills were paid quicker than smaller ones during 2015. An average invoice of over £20,000 was paid the fastest out of all bills at an average of 12 days beyond terms. The invoices that took the longest to be paid were bills between £100-£1,000, which took an average of 18 days beyond terms to be paid. Invoices worth £5,000 and above were all paid on average under 15 days beyond terms, whilst anything smaller had a longer waiting time.
Reflecting on this, it is wise to check your customers’ DBT and forecast your cashflow to expect late payments throughout 2016. Late payments could seriously damage your cashflow, so do your homework on potential customers before you sign any deals with them- check their credit report and their payment history. It is also wise to monitor your customers; their circumstances can change at any time so make sure you’re aware of any changes as soon as possible. Our Risk Tracker can monitor your customers for you and alert you by email if anything on their report changes.
Download a free company credit report of your choice below to see what information is available and how we can help you combat late payments and bad debt.