Working capital is vital for any growing business. Yet, for some time now, smaller suppliers have complained of being squeezed by larger, more powerful enterprises, who are not always the quickest to pay on time.
According to Bottomline Technologies’ second UK Business Payments Barometer report, 45% of financial decision makers at SMEs surveyed claimed slow payer ethic was the number one challenge to them getting paid.
While the Chartered Institute of Credit Management, in concert with the UK government, has set up the Prompt Payment Code – to which Bottomline is signed up – and the duty to report payment practices came into force in April, the relatively high percentage was no shock to Ed Adshead-Grant, General Manager, Payments, at Bottomline.
“It’s not a massive surprise,” he explains. “We knew the industry had this problem; it has been so slow to get its act together that regulations have had to come into force. We’ll see if they have an impact in publicly naming and shaming the bad players and late payers.”
Encouragingly, Bottomline’s research revealed collaborative relationships as the most effective means of dealing with accounts receivable issues (48%), in contrast to proactive debt collection (31%), automated Direct Debit (27%) and supply chain finance (19%).
“I think this finding links very much with the digital economy and the migration to real-time quick, repeated commerce,” says Adshead-Grant.
“It means having that easy way to connect to a call centre, to discuss a debt, or organising those payment plans. If you are using the technology underneath, it’s that much easier to keep in contact.
“I can see collaborative customer relationship being a growing trend in the whole accounts receivable area, definitely.”
If there are challenges for businesses when it comes to receiving payments, the next quandary comes in the face of protecting cash once it is within the organisation.
Some 56% of respondents in this year’s survey named external cyber fraud as a concern, compared to 37% in 2016. Similarly, the external exploitation of internal payment processes was identified by 39% of those surveyed – a 62% year-on-year increase. But most astonishingly, fraud by internal staff was listed by 31%, a 138% year-on-year increase.
Recent news stories, including reports earlier this year of fraud committed by a treasurer at ABB’s South Korean subsidiary, have only heightened levels of apprehension.
“I think part of it is down to the sensationalism in the press,” says Adshead-Grant. “We have a saying in the industry: payments must always be boring. You don’t want sensationalism.”
Lurid headlines aside, the real challenge for finance departments tackling fraud is spotting breaches for smaller amounts, which are likely to happen more regularly and are more susceptible.
Tellingly, this year’s research revealed that while only 17% of financial decision makers estimated that 10% or more of their company’s revenue had been subjected to attacks (down from 36% last year), 68% feared 10% or less of their company’s revenue had been subject to attacks by fraudsters – up 28% year on year.
When it comes to facilitating better cash management, Adshead-Grant issues a simple rallying cry to the fintech sector: we must do more.
“In light of open banking coming into play and PDS2, we need to do a better job as a community in making sure companies have the very best real-time access to all of their cash, so that they can detect anything that’s missing,” he says.