SME logistics firms mid-table for late payments: Amex

Credit company’s survey puts issue down to cash-flow problems on all sides

SME logistics firms mid-table for late payments: Amex
Martin Seward sees timely payment undervalued


Late payments strategies are compounding cashflow problems for logistics firms, according American Express (Amex), which see them as impacting and impacted by the practice.

The major credit firm says its survey of 355 chief financial officers (CFOs) mid-sized businesses – those with turnovers of $2-$300 million – across the economy showed with 30 per cent of all businesses were unable to reconcile invoices at least every other month and that such businesses owe "$8 billion in outstanding payments to suppliers, with more than $2 billion currently overdue".

The logistics sector compared favourably with the midmarket average, with 24 per cent unable to reconcile invoices at least every other month.

"However, late payment remains a significant issue in the logistics industry, with mid-sized logistics businesses currently owing on average $44,000 in outstanding supplier payments, 27 per cent of which is overdue," Amex says.

Martin Seward, ‎vice president for small and medium enterprises at American Express Australia, says that the issue of delayed or late payments was not only impacting suppliers, but could be costing mid-sized Australian businesses, including the logistics industry, billions of dollars every year.

"There is no doubt that suppliers rely on timely payment, with many going as far as to offer financial incentives for early payment," Seward says.

"More than half [59 per cent] of mid-sized logistics businesses last year secured early supplier payment discounts, at an average total value of $25,000, leaving them open to extra cash flow to reinvest back into the business for research and development or something as simple as staff recognition programs.

"It’s encouraging to see that businesses and their suppliers can both benefit from preferential payment arrangements, but concerning that not all Australian mid-sized logistics CFOs recognise the value of timely payment – both to their suppliers and their own business."

Every logistics industry CFO surveyed said they would value the opportunity to pay suppliers on time however, cash flow pressures were cited as a key factor when deciding how to pay suppliers, the company says.

Given the opportunity to extend cash flow for up to 50 days, 35 per cent of logistics said they would prioritise faster payment of suppliers.

"We have seen CFOs who deploy credit as part of their cash flow management toolbox and benefited from the flexibility to pay suppliers early, while keeping capital in their business for longer. Using credit can also offer other benefits, such as reward schemes," Seward says.   

"Despite a positive outlook for mid-sized organisations, with 65 per cent of businesses forecasting growth in 2017, cash flow pressures still constrain mid-sized businesses from achieving their full growth potential. In an increasingly competitive economy, today’s CFO will not want to miss out on opportunities offered by effective and efficient cash flow management."

Other findings from the survey were:

  • early payment of suppliers is a key hallmark of successful businesses, with 77 per cent of high-growth mid-sized businesses securing early supplier payment discounts
  • logistics CFOs said the additional working capital saved through early payment discounts could be transformational for their business, with almost half redirecting additional cash flow towards team training (47 per cent), new products and equipment (41 per cent ), and nearly one third of CFOs reinvesting supplier savings into business innovation (29 per cent)
  • logistics business outgoings are split 73 per cent  on domestic payments against 27 per cent  on international payments; cash remains the preferred payment option for domestic payments (41 per cent ), compared with 37 per cent who use credit, whereas half of CFOs use credit for international payments
  • logistics industry respondents made up 5 per cent of the total survey sample. 

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