Slow payments are a major problem in business generally but they disproportionately affect SMEs, who often lack the financial resources to cover the period spent waiting for invoices to be paid. This results in a range of serious issues; from late payment of staff to having to rely on overdrafts, and, in some cases, even bankruptcy.
Research by Zurich reveals the extent of the problem finding that almost half (45 per cent) of those who experience late payment have to wait up to three months to receive the money they are due. What’s more, this culture of slow payments is creating a knock-on effect, whereby companies who are paid late cannot then afford to pay their own suppliers, further exacerbating the issue.
There’s a wealth of information available about the individual steps SMEs can take to tackle the slow payment problem specific to their business. But to make a more lasting change, action has to be undertaken to improve the systemic issues at the root of the problem. The good news is that SMEs are not completely on their own and there are a number of companies who can help them improve their payment processes.
See also: How to deal with late payment
Improving the global payments infrastructure
Globalisation and technology have rapidly changed not just our lives but the way we do business, with many of today’s SMEs importing and exporting goods abroad. As a result, when paying international invoices, they are often at the mercy of the global money transfer infrastructure.
This traditionally slow, expensive and opaque system exacerbates the late payment problem by adding on expensive fees and increasing the time it takes for payments to get to their destination.
In today’s tech-enabled world, money transfers simply don’t have to be this difficult and there are a number of things SMEs can do to ensure they are not.
Work with experts who challenge the status quo
Whilst it might seem tempting to try and do everything yourself, especially as a small business with more limited resources, in reality this often ends up taking more time and money than if you’d worked with an expert from the start.
When choosing the business you want to work with, it might seem easiest to select the one you are familiar with. For example, when it comes to cross-border payments, many firms automatically turn to their bank. But this is not the only or necessarily the best option. In fact, it can pay to do some research to identify those companies who do things differently – they are often faster and cheaper.
Together with many of our clients, for example, we are challenging the status quo in the global payments ecosystem by removing the complexity of compliance within payments. B2B Pay and Money Mover are just two of innovative companies out there who help cut the cost of making international payments. Working with companies like these does not just reduce the cost of making cross-border, but also that this gets to the creditor faster.
Technology has revolutionised almost every sector from retail to entertainment, and there’s no reason why B2B payments should be lagging behind. Another benefit of working with these innovative companies is that many will be using some of the latest technology, which you can then leverage without the total cost of ownership.
By partnering with companies who don’t just use the latest technology but also ensure that your processes are fully compliant, you’ll have more time to focus on core business activities.
In order to really tackle the slow payments problem plaguing their sector, SMEs should challenge the current status quo in money transfers by working with experts and leveraging their technology to ensure they are getting the best deal when sending and receiving money from abroad. It’s often said that SMEs are the backbone of our economy, so the more businesses that get on board to improve the payments infrastructure and help them focus on their core business, the better.
Fiona Tee is chief finance officer of Currencycloud