The Real Cost of Late Payments

The impact of late payment on suppliers has always been well documented. But, what’s rarely talked about is the impact that not paying on time has on the business which chooses to skip a payment deadline. With rising business costs, late payment and economic uncertainty high on businesses’ minds it can be tempting to delay a supplier payment in order to preserve your own cash flow. But, doing this can have serious consequences for your business. Here we look at 3 of the negative repercussions you should consider when paying late – or not at all.

1. Damage to the supply chain

Delaying a supplier payment might protect your own cash flow but it has a knock-on effect, pushing the cash shortfall down throughout the supply chain instead. When providing a product or service on credit terms a supplier has a cash flow gap that they need to cover, and when a payment is late this puts increased pressure on their ability to meet their own commitments.

2. Jeopardising supplier relationships

Understandably, if your late payment has resulted in financial hardship for your supplier, they are less likely to accept your next order. If you value their products or services you should endeavour to make all payments within terms so that you protect that relationship. If the situation arises where you’re experiencing cash flow difficulties and you feel like you might need to make a payment late, communication is key. If you talk to the supplier, and you’ve been a reliable payer in the past, they may value your honesty and offer you a payment extension.
This honest dialogue is key to preserving relationships and protecting both businesses from more serious cash flow difficulties and keeping future prices down.

3. Stress to employees

All of the consequences listed above are likely to negatively impact your employees. What’s more, when angry suppliers call your business looking for their payment, more often than not a member of your staff will field the call and have to deal with it. This is not a comfortable position for your employees to be in.
Your staff are your company’s biggest asset, and when they’re feeling the pressure this is likely to have further repercussions throughout your business.
Where possible, communicate with your employees so they are aware of the situation and make sure you have provided adequate training to help them deal with complaints and criticism from suppliers.

If after all of this you decide to pay late or withhold payment, you do so knowing the consequences.