Since late 2017, businesses in the UK have been required to publish their payment performance statistics biannually and report the data to government regulators.
As a result, crafting a compliant and sustainable payments strategy is more important to UK manufacturers’ success than ever. As more and more buyers, retailers, and other third parties use this public information to make business decisions, UK companies’ time-to-pay will impact their brand reputation (and ultimately their revenue).
A new report from American Express looks at the trends in the data to date and shares insights on how UK manufacturers can use their payment strategy to support their reputational goals.
Supplier Expectations
UK manufacturing amounts for about 19% of UK GDP and spans many diverse industries. Payment stats vary drastically across the sector. Almost half (48%) of UK chemicals manufacturers pay invoices within 30 days, for example, but the same can be said of just 27% of UK food manufacturers.
Of course, industry standards dictate how soon payments are expected. UK vehicle manufacturers, who pay close to a third (29%) after 60 days, are most likely to meet suppliers timing expectations – making over half (52%) of payments on time.
Capital Considerations
Working capital implications affect how eager manufacturers are to meet those agreed terms. Food manufacturers have increased days payable outstanding (DPO) at a similar pace (5% CAGR) to their operating cashflow – hinting that industry players tend to use flexible payment terms to support operational liquidity.
Reputational Advantages
Navigating the trade-off between payment terms and cashflow will get more complicated, however, as data on payment practices accumulates.The competitive benefits of reporting shorter payment terms to suppliers may be substantial – making it wise for leaders to embrace strategies, solutions, and partners that can help them find (and maintain) an optimal balance.
For more information you can download the full whitepaper here.
Note: The data set used in this analysis included 539 UK Manufacturing firms with average revenues of £2 billion. It is based on published 2017-2018 payment information from www.gov.uk/check-when-businesses-pay-invoices.