All businesses, large and small, face cash flow pressures. There will always be bills to pay and stock to buy, and late payments and lengthy payment terms inevitably hinder every company, regardless of where they sit in the supply chain.
Bacs reported in February that £32 billion was owed in overdue payments to the UK’s small and medium sized businesses, highlighting a significant problem. In an attempt to reinstate equality in the supply chain, an advisory board was set up in October last year to strengthen the Prompt Payment Code.
This code means participating businesses will comply with 30 to 60-day payment terms. The code will be further strengthened this year to keep pace with legislation, when all large company signatories will have to submit half-yearly reports showing their payment activity under the Small Business, Enterprise and Employment Act. SMEs will also have to provide annual payment performance reviews.
This improved transparency and visibility is a good thing for both large businesses and their suppliers, as it will help to ensure timely payment and better control of cash flow. That being said, while a formal agreement and strengthened legislation is a positive step for the supply chain, there is more that can be done to achieve a seamless payments environment.
Paper invoicing raises many difficulties for businesses including a lack of flexibility and a higher risk of human error or invoices getting lost. Technology like Tungsten’s e-invoicing platform is revolutionising this process and bridging the gap between businesses and their suppliers. By moving the invoicing process online, technology is providing flexibility and visibility to both businesses and their suppliers, as well as reducing fraud and limiting the room for mistakes.
Taking steps toward prompt payments and the increasing uptake of technology is helping to grease the wheels of the supply chain and allowing businesses to do business. Continued innovation in the financial supply chain may mean that, one day, a seamless payment environment will be a reality for all.
☛ Britt Lintner is head of sales at Tungsten