What impact could paying suppliers late have on your business?
Have you ever considered paying a supplier late to protect your own finances?
When your cash flow is restricted, it can be tempting to delay supplier payments. But, paying late can negatively impact your business, supplier relationships and your future success.
A new survey by Medius and Sapio asked 200 finance and 200 procurement professionals in the UK about their payment practices to explore the risks to supplier relationships.
The research revealed the following repercussions of not paying suppliers on time:
- Supplier relationships suffered (73%)
- Goods or services withheld until invoices paid (62%)
- Vendors reduced or stopped discounts (59%)
- A business refused to work with them again (55%)
- The reputation of their organisation suffered (27%)
- Customers cancelled orders (24%)
As well as damaging the supply chain, delaying payments can damage your credit rating.
If a supplier uses the Small Claims Court or registers a County Court Judgment against you this will go on your credit report.
This will make buying on credit and accessing funding more difficult in the future.
Often when banks consider lending, your credit score and how big a risk they perceive your business to be are important.
Improving your financial standing may enable you to negotiate a better rate. Making a conscious effort to pay bills and invoices on time will help ensure your credit score is the best it can be.
What can you do?
When your business is struggling to pay suppliers on time it can be daunting, but it’s not uncommon.
Many businesses face this challenge at some stage. The key to overcoming it is to act quickly to improve your cash flow.
One way of doing this is to secure a suitable finance facility to generate the funds needed to pay your suppliers.
Here are three finance options that could boost your cash flow.
If your working capital is tied up in your sales ledger you could benefit from invoice finance.
Invoice finance bridges the cash flow gap between paying suppliers and getting paid by allowing you to release up to 90% of an invoice’s value within 24 hours of its issue.
The remainder is then passed across once payment is received from the customer, less the invoice finance company’s fees.
If you need a temporary cash flow boost, it is also possible to fund single invoices.
This is particularly useful if you have an invoice of particularly high value or those supplied on longer-than-usual credit terms.
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If you are not looking to leverage funds against assets, a business loan could be a suitable option as it allows you to quickly access working capital that can be used for any business purpose.
With so many loan providers and varying lending criteria, it can be hard to identify the right solution for your business yourself.
However, working with a commercial finance broker can highlight the best fit for your needs and allow you to secure the finance needed to pay your suppliers.
Asset based lending
If you have cash tied up in various assets, an asset based lending (ABL) solution could be the ideal facility to free up working capital to pay suppliers.
With invoice finance at its core, ABL also releases additional funding against the value of other assets, including plant and machinery, stock and property.
As the funding is secured against the value of your assets, ABL is typically more flexible than loans or overdrafts.
Helping you find the most suitable solution
As an independent finance broker with over 20 years’ experience, we can help you to secure the most suitable funding facility to get your cash flow back on track.
- Listen to you. Really listen. We want to know your unique funding needs and challenges so that we can identify the most appropriate facility.
- Work with you to find the most suitable facility and provider for your business’s needs.
- Introduce options which are tailored to you, based on our extensive knowledge of the market.
- Keep in touch to help you get familiar with the new funding facility and make sure your funding continues to work for you in the long term.