Are firms still struggling to pay suppliers?
In the world of logistics and procurement, it's not uncommon for companies to run a few days, weeks or sometimes even months behind on their payments to suppliers. It may not be what anyone wants, but it's a reality. Unfortunately, even as the effects of the pandemic draw down, and many businesses return to normal operations, late payments to suppliers remains a persistent problem. Many companies experienced all types of difficulties throughout the pandemic and even now, as the effects of the outbreak are winding down in most parts of the country, the financial stressors continue, according to The Wall Street Journal. Indeed, recent data from the Hackett Group provided to the newspaper showed that the average large business in the U.S. was taking 58 days to pay suppliers through the end of the first fiscal quarter of the year, up from 55 days at the same time last year. That was still down from full-year 2020 data, which showed average payments came in 62 days  but of course, much of the year was spent living under COVID restrictions and economic tightness, the report said. However, the persisting problem is of interest because the average company examined carried a cash balance that was up 14% on an annual basis. Many suppliers are dealing with late payments. Small businesses affected  With cash reserves rising for many big companies  which are powering out of the recent downturn in a major way  growing so much, some smaller companies believe the decision to drag feet on paying for orders is by choice, rather than a necessity of a trying time, according to a recent Melio/YouGov survey. Indeed, 55% of small business owners say they believe these are "deliberate" and half believe they should be able to charge interest on those orders. A quarter say they have orders that are between 20 and 30 days late on payment, and 47% say orders specifically from larger businesses have gotten worse in the past year, the report said. For 30%, this issue has become so problematic that they may not be able to keep their business open. They've also prompted 40% to delay plans for hiring, 39% to delay inventory purchases, and 36% have been forced to cut their employees' hours. How to handle the uncertainty  Of course, companies shouldn't be forced to make these kinds of decisions, and anything they can do to boost their flexibility until things return to normal will be of significant benefit, according to the law firm Faegre Drinker. That may include accepting discounted or partial payments, especially if business partners are effective in communicating their challenges. That way, businesses gain the capital to continue operating without putting a pain onto longstanding business relationships. The more you can do to plan for these potential issues, the better off you will be when you actually have to deal with these obstacles. Whether they're a one-time problem post-pandemic or a whole new way of working with others in the supply chain, you could be setting yourself up for a smoother road in the future.