Author: Tim Cummins
IACCM has today issued the results of its latest survey into payment terms. This multi-jurisdictional, cross-industry study attracted input from 393 organizations and gathered data from the buyer community, therefore reflecting terms and policies in business-to-business transactions.
Compared with IACCM's previous survey in 2017, there are three items of particular note:
Across all participants, the average contractual payment term specified by buyers is 43.5 days (an improvement since the last survey in 2017, when the average was 47 days). A 30 day payment period remains the most common, specified by 53% of respondents. The trend observed in 2017 towards longer payment periods appears to have stalled and, in some cases, reversed. Reasons cited include the impacts of regulation (particularly within the European Union) and reputational damage from adverse publicity.
On average, late payment occurs in 19% of transactions. This results in the average actual payment being 47 days (again, a significant improvement on 2017, when the average was 55 days). A further factor in this reduction is that a number of organizations have reduced their payable period.
26% say the payment period is non-negotiable. As in the last survey, the readiness to negotiate increases among the organizations with longer payment periods.
68% of respondents operate with consistent standards across worldwide operations, though for 46% that standard may differ across different types of acquisition.
Just under 20% are currently planning to change their payment terms and of these, almost 2 in 5 are considering a reduction in the payment period.
In general, the survey results suggest that the trend towards longer and more onerous payment terms has either ended or is in abeyance. At the same time, there appears to have been a strong focus on improving efficiency through automation, resulting in more timely payment of invoices. The fact that a significant proportion have either reduced or are considering a reduction in the payment period suggests increased sensitivity to regulation, reputation, and issues such as supplier loyalty.
A copy of the full report and survey findings is available to members in the Resources section of the IACCM website at http://www.iaccm.com