How Delayed Payments Can Affect Supplier Relations

Delayed payments to suppliers

Delayed payments can have significant negative consequences on supplier relationships and overall business operations. As an example, more than a third of European businesses are increasingly paying their suppliers later than they would accept from their own clients. Suppliers rely on prompt payments to maintain their cash flow and meet their financial obligations. 62% of European businesses said that reduced overdue payments would enable them to increase investment in products and expand service offerings. Moreover, delayed payments can disrupt supply chains, leading to operational inefficiencies and even shortages of essential goods or services. This is an uprising trend where research shows that more than half of the businesses in the US, UK, and Europe are paying suppliers 22 days later on average compared to 12 months ago.

What causes late payments?

Late payments in business transactions stem from various factors, including cash flow gaps, inefficient internal processes, and management lapses. Cash flow issues, which are currently made worse by a global crisis involving high-interest rates and market uncertainty, often hinder timely payments. Additionally, technological challenges such as limited visibility into payments and disconnects between procurement and finance teams contribute to delays. Moreover, disputes over invoices, arising from errors or misunderstandings, also significantly impact payment schedules. 

The impact of late payments

Late payments can damage supplier relationships, diminish bargaining power, and tarnish reputation, impacting supply chain stability and business competitiveness.

Damaging supplier relationships - Consistently delaying payments to suppliers can eventually lead to suppliers choosing to cut ties with your business, wrestling in a disruption in your supply chain. On the other hand, timely payments can help build trust with suppliers, showing that you value their work and respect their contribution to your business. 

Lost bargaining power - Late payments increase the risk of missing out on extended payment periods and special offers from suppliers. This loss of bargaining power can over time impact cash flow, and prioritization, and erode trust within the industry over time.

Reputation - A reputation for late payments could make it hard to find new suppliers. In a competitive market, being known as a company that consistently pays on time is crucial for standing out among other rental platforms.

New payments systems like ZTLment

Automate your processes - By automating supplier payments, companies can reduce the administrative burden associated with manual payment processing and remove human errors. 73% of executives at mid-size firms report that automation improves cash flow, increases savings, or contributes to business growth. 

Bulk Payouts - Implementing bulk payment capabilities and utilizing virtual accounts can enhance efficiency in payment processing. This can eliminate the need to manually match numbers of IBANS and allow financial controllers to focus on value-added tasks rather than administrative overhead. 

Transparency - Offering total transparency between payer and payee ensures all parties have a clear understanding of their financial obligations, which induces trust. This can be achieved by facilitating SEPA transfers to suppliers immediately upon transaction completion which provides quick access to funds and enhances cash flow. This promotes overall compliance and security but can foremost provide a competitive advantage. 

To combat these challenges, ZTLment offers programmable and fully automated payouts. Businesses can set up unlimited virtual accounts and gain a shared view of where the money is between business partners, all within an intuitive dashboard interface. Want to know more about how to navigate complex payout processes? Book a meeting below.