T H E STATE OF PAYMENT www.marketinvoice.com // @marketinvoice
THE PAYMENT REPORT JANUARY 02 CONTENTS 04 KEY FACTS 05 PAYMENT OVER TIME 06 BLUE CHIPS VS SMES 07 BLUECHIPS & FTSE 350 08 SME 09 BIG TECH 10 BANKS 11 PUBLIC SECTOR 13 SUPERMARKET 14 RETAILERS 15 INTERNATIONAL 16 UK VS EUROPE VS REST OF WORLD 17 REGIONAL BUSINESS 18 WHO PAYS WHEN? 19 CONCLUSIONS 02 THE STATE OF PAYMENT
THE PAYMENT REPORT JANUARY 03 Late payment is the silent killer of modern business. The simple act of not getting paid when you should has an adverse effect on the success of any company. But it s Britain s small and medium sized enterprises which make up 99% of all UK businesses that bear the brunt of the problem. It s estimated that UK SMEs are owed more than half a trillion pounds in outstanding invoices. That number speaks for itself. This report dives deeper into where and why late payment is occurring, across different sectors, industries and countries. Our data challenges the pre-existing conceptions of certain companies as villains of the small supplier community, and looks to uncover new findings that go beyond media headlines. We also look further afield, comparing the UK with its European counterparts, and the rest of the world. At MarketInvoice, we capture data on every aspect of an invoice. Who it s issued by, issued to and issued when. More importantly, we also record when each invoice is contractually due, as well as when it is actually paid. These numbers underpin our lending model at its most basic level. As a result, we ve collected a vast pool of data in the last five years over 30,000 individual invoices, issued to companies of all sizes, in over 80 different countries. This report, the first of its kind, looks mainly at payment records in 2015. However, we plan to release new data regularly, and if this report captures the state of late payment here and now, future data will track how the problem evolves over time. The data in this report highlights a very real, very prevalent issue that affects millions of businesses owners every day. Whilst our data goes some way to illustrate the scale of late payment across the country, real action must be taken to stem the problem at its source. Larger companies must take more responsibility in their position of power with suppliers, and change what is currently, a damaging culture for UK businesses. ANIL STOCKER Co-founder and CEO MarketInvoice 03 THE STATE OF PAYMENT
KEY FACTS 60% of invoices are PAID 1/5 invoices paid more than TWO WEEKS 6.0 - average invoice paid DATA FROM: OVER 30,000 INVOICES ACROSS 5 YEARS FROM 80 COUNTRIES 04 THE STATE OF PAYMENT
PAYMENT OVER TIME PROPORTION OF INVOICES PAID BY DEBTORS (%) 70% 60% UK TOTAL 50% 40% 2013 2014 2015 EUROPE (NOT UK) 05 THE STATE OF PAYMENT
BLUE CHIPS VS SMES PROPORTION OF INVOICES PAID BY (%) 50% 40% 51.4 BLUE CHIP 53.4 SME 62.2 BLUE CHIP 61.7 SME 30% 2014 2015 AVERAGE PAYDAY 2015 SME 4.3 BLUE CHIP 5.9-2 -1 1 2 3 4 5 6 7 DUE DATE Whilst larger companies generally had a worse payment record than smaller business, late payment is becoming more prevalent across the board when compared to previous years. 06 THE STATE OF PAYMENT
LARGE COMPANIES BLUECHIPS & FTSE 350 AVERAGE PAYDAY 2015 FTSE 350 4.0 BLUE CHIP 5.9-2 -1 1 2 3 4 5 6 7 DUE DATE PROPORTION OF 2015 INVOICES PAID BY (%) 60% 50% 62.2 BLUE CHIP 60.9 FTSE 350 40% FTSE 350 companies have a better record than their fellow blue chips, and also out perform SMEs. 07 THE STATE OF PAYMENT
SME SPOTLIGHT Of all early payments, AVERAGE 16.3 34% ON TIME 4% OVER 1/4 Of all late payments, AVERAGE 15.9 all invoices TWO WEEKS late or more 62% AVERAGE PAYDAY: 4.3 When SMEs do miss the due date of an invoice they tend to do so by some margin. The same can be said for payments made early. This is systematic of poor planning and ad-hoc admin. 08 THE STATE OF PAYMENT
BIG TECH SPOTLIGHT 44.6% TOP SECTOR for early Epayment ARLY 44.6% ON TIME 5.9% 50.5% Of all late payments, AVERAGE 14.7 - the worst sector AVERAGE PAYDAY: 1.7 This data shows a general lack of control and disregard for 50.5% suppliers, rather than a systematic culture of late payment. Data from 8 of the world s 14 largest technology companies 09 THE STATE OF PAYMENT
BANKS SPOTLIGHT AVERAGE PAYDAY 2015 BANKS 0.3 TECH COMPANIES 1.7 FTSE 350 4.0 BLUE CHIP 5.9-4 -2 2 4 6 8 10 12 DUE DATE PAYMENT BREAKDOWN (%) 52.6 44.7 2.6 ON TIME Banks were the only sector that paid earlier more often than late in 2015. 10 THE STATE OF PAYMENT
PUBLIC SECTOR SPOTLIGHT AVERAGE PAYDAY 2015 BANKS 0.3 TECH COMPANIES 1.7 FTSE 350 4.0 PUBLIC SECTOR 6.3-4 -2 2 4 6 8 10 12 DUE DATE PROPORTION OF INVOICES PAID BY PUBLIC SECTOR (%) 44.7 61.7 2014 2015 AVERAGE 2014 PAYDAY 0.4 AVERAGE 2015 PAYDAY 6.3 The payment record of the public sector grew much worse last year. 11 THE STATE OF PAYMENT
PUBLIC SECTOR BREAKDOWN AVERAGE PAYDAY 2015 LOCAL COUNCILS 0.3 HOSPITALS & NHS 7.2 SCHOOLS & ACADEMIES 17.9-4 -2 2 4 6 8 10 12 14 16 18 DUE DATE PROPORTION OF 2015 INVOICES PAID BY (%) 80.6 SCHOOLS & ACADEMIES 63.9 HOSPITALS & NHS 50.3 LOCAL COUNCILS It was schools and academies in particular that paid exceptionally late, with local authorities actually paying relatively promptly. 12 THE STATE OF PAYMENT
SUPERMARKET SPOTLIGHT AVERAGE PAYDAY 2015 BANKS 0.3 TECH COMPANIES 1.7 FTSE 350 4.0 SUPER MARKETS 7.2-4 -2 2 4 6 8 10 12 DUE DATE PROPORTION OF 2015 INVOICES PAID BY (%) 68.7 SUPER MARKETS 60.9 FTSE 350 50.5 TECH COMPANIES 44.7 BANKS Data from 9 of the UK s 10 largest supermarkets 13 THE STATE OF PAYMENT
RETAILERS SPOTLIGHT AVERAGE PAYDAY 2015 BANKS 0.3 TECH COMPANIES 1.7 FTSE 350 4.0 SUPERMARKETS 7.2 RETAILERS 10.7-4 -2 2 4 6 8 10 12 DUE DATE PROPORTION OF 2015 INVOICES PAID BY (%) 69.8 HIGH STREET 62.0 E- COMMERCE AVERAGE HIGH STREET PAYDAY 14.0 VS AVERAGE ECOMMERCE PAYDAY 7.2 High street retailers have the worst payment record of any sector or industry we studied. 14 THE STATE OF PAYMENT
INTERNATIONAL AVERAGE PAYDAY 2015 PROPORTION OF 2015 INVOICES PAID BY (%) JAPAN -6.5 BELGIUM -4.1 NETHERLANDS -3.0 SWITZERLAND 35.0 SWITZERLAND -0.8 GERMANY -0.5 GERMANY 38.3 IRELAND -0.1 DENMARK 1.2 DUE DATE NETHERLANDS 40.2 CHINA 1.9 FINLAND 3.4 UK 5.85 FRANCE 6.1 USA 7.1 CANADA 12.0 POLAND 12.0 ISRAEL 13.5 USA BELGIUM IRELAND 45.7 45.9 50.6 DUE DATE UAE 14.3 UK 62.3 SOUTH AFRICA 16.5 MEXICO 18.6 AUSTRALIA 26.4 FRANCE 75.4 15 THE STATE OF PAYMENT
UK VS EUROPE VS REST OF WORLD PROPORTION OF 2015 INVOICES PAID BY (%) 62.3 UK 45.7 USA 40.4 EUROPE (NOT UK) 72.5 REST OF WORLD (NOT EU/UK) AVERAGE EUROPE PAYDAY 0.3 VS AVERAGE UK PAYDAY 5.85 The UK lags behind Europe and USA but not the rest of world. 16 THE STATE OF PAYMENT
REGIONAL BUSINESS SPOTLIGHT TREATMENT OF LOCAL SMES PROPORTION OF INVOICES PAID TO LOCAL BUSINESSES IN THE UK (2015) NORTH WEST 64.1% SCOTLAND 50.4% YORKSHIRE 68.9% NORTH EAST 62.4% WEST MIDLANDS EAST MIDLANDS 57.4% EAST OF ENGLAND WALES 64.4% 60.0% LONDON SOUTH EAST SOUTH WEST 45.2% 61.4% 17 THE STATE OF PAYMENT 66.3% 59.8%
WHO PAYS WHEN? SECTOR BANKS 0.3 TECH COMPANIES 1.7 UK SMEs 4.3 FTSE 350 4.0 PUBLIC SECTOR 6.3 UK BLUE CHIPS 5.9 ONLINE RETAILERS + SUPER MARKETS 7.2 RETAILERS 10.7 HIGH STREET RETAILERS 14.0-6 -4-2 2 4 6 8 10 12 14-6.5-3.0-0.5 5.9 10.6 JAPAN NETHERLANDS GERMANY 0.3 UK 7.1 REST OF WORLD (NOT EU/UK) COUNTRY -0.8 SWITZERLAND EUROPE (NOT UK) USA 18 THE STATE OF PAYMENT
CONCLUSIONS Late payment is very much a UK problem. Other European countries such as Germany, Switzerland, the Netherlands and Belgium have a significantly better payment record. However, all payments from debtors in these countries were still made to UK businesses how these European nations treat businesses of their own country, is unknown. The Government should review how these other large economies manage payments regulation. There is a fundamental culture of systematic late payment within the UK s largest retail groups. Whilst supermarkets often make the headlines, our data actually finds high-street retail stores to be the worse sector for paying suppliers late. In sectors such as retail, the prominence of late payment is so extreme and so consistent that one has to also assume it is by design. The increased consumer demand for value from retailers could be leading to the supplier being squeezed hard at the other end of the deal. The UK public sector has a disappointingly poor record for paying on time especially within its academic institutions. The government must lead by example if it is to successfully clamp down on the substandard practices of big businesses. The payment records of SMEs and bluechips are more similar than one would expect. However, SMEs tend to pay far more sporadically, often very late or very early. This would suggest an ad hoc attitude to payment, or a deliberate delay for the sake of cash flow. There is also the possibility that SMEs are merely passing on a payment problem from the top of the chain. There is a broad North-South divide in the UK when it comes to the treatment of SMEs on a regional level. Whilst not absolute, businesses in the North West and Yorkshire, were paid late considerably more than those in London and the South. Japan s unique record of paying early might be explained by its zero to negative interest rates. With no reason to save, capital is actually better utilized by investing in material stock and physical goods. Thus, big Japanese businesses actually have an incentive to pay promptly, with less reason to hoard cash. The same case can also be made for Switzerland. 19 THE STATE OF PAYMENT
THE PAYMENT REPORT www.marketinvoice.com @marketinvoice info@marketinvoice.com LONDON Hogarth House 136 High Holborn London WC1V 6PX +44 (0)203 784 4450 MANCHESTER 5 th Floor Chancery Place 50 Brown Street Manchester M2 2JT +44 (0)161 241 1854