Suppliers face longer payment periods

Although the economy is strengthening, this doesn’t seem to be leading to an improvement in the financial situation for suppliers from the SME sector. According to a study on behalf of Betaalme.nu, almost half (44 percent) of the SME companies surveyed have been confronted with extended invoice settlement periods. Furthermore, 45 percent of them have been asked to accept a longer payment period than they would like. A third of the suppliers surveyed are paid later than the agreed settlement period. Last but not least, 48 per indicate that they’ve been asked to give a discount.

There tends to be an imbalance of power in the relationship between smaller suppliers and large customers. Small suppliers are keen to stay on the right side of their biggest customers, yet nowadays they are often a lot more vulnerable. Late payment of invoices by big companies can harm freelancers’ and SMEs’ liquidity and restrict their growth opportunities, and over 20 percent of the suppliers surveyed state that this can even put the future of their business at risk. 

No excuses

In times of economic slowdown, large companies often feel inclined to extend their payment terms as a way of improving their working capital. But now, even though the economy has been on the up again for a while, settlement periods are still under pressure. There are no longer any excuses for delaying invoice payments. That’s why this is a good time for small and medium-sized suppliers to raise the matter of faster payment with their customers.

The survey also reveals that suppliers are failing to seize opportunities for getting paid more quickly. Half of them wait a full working week or more after supplying their product or service before sending the invoice, meaning that the payment is also received later.

Approved invoice is worth money

In another finding from the survey, it appears that little information is exchanged about the status of an invoice. Only 18 percent of the suppliers receive a notification when their invoice has been approved for payment. An approved invoice can be used to apply for financing. 55 percent indicate that they would like to be notified when the invoice has been approved. 

A third of the suppliers surveyed say that their invoices are paid later than agreed. The customer often complains that the invoiced total is incorrect or that other details (e.g. PO number) are missing, which is why it is very useful for suppliers to know the status of their invoice. Nevertheless, 83 percent do not contact customers in this respect until after the settlement period has expired.

Delays due to disagreements

Customer disagreements about invoices also cause delays in the payment process. Of the SMEs, 33 percent say that they are sometimes involved in disputes that generally take between 10 and 30 days to be resolved – another reason why it is important for suppliers to be aware of the status of their invoice. One efficient way of preventing mistakes or disputes is electronic invoicing. Since the data is no longer entered manually, the chance of errors is reduced. The Dutch government has already made electronic invoicing mandatory, but it has not yet been fully embraced by the private sector. Based on the latest estimates, approximately 15 percent of small and medium-sized suppliers still don’t invoice electronically.

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