Keywords: invoice, electronic invoicing, einvoicing, e-invoicing, payment terms, incentives

British businesses set average payment terms of 25.3 days

Susie West | News | 3 July 2012

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British businesses appear to be performing better than those across Western Europe when it comes to settling invoices on time, according to the latest Payment Practices Barometer from Atradius.

The report shows that the average payment term set by companies in Britain for their B2B customers is 25.3 days, which is far less than the 38-day average set by Western European firms.

Typically only 28.7 per cent of invoices issued by British businesses to domestic customers are paid after the due date. By comparison, Western European companies settle 30.6 per cent of invoices from domestic customers late.

British firms are also doing better on average day sales outstanding at 27.4 days compared to 51.4 days in Western Europe.

Atradius suggested that the figures may be illustrative of tighter controls in Britain, but it also pointed to the greater use of incentives for early payment.

Indeed, British businesses were found to be more likely than those in Western Europe to offer discounts for early payments, especially medium-sized enterprises and those in the manufacturing and wholesale and retail distribution sectors.

"As a further positive, the Brits were less likely than their counterparts to vary terms based on domestic and foreign trade," the report read.

However late payment is still occurring, and in the current economic climate it can have devastating impact on companies, particularly smaller ones relying on a steady stream of cash.

When asked about the main reasons for payment delays by B2B customers, insufficient availability of funds came out on top both domestically and internationally.

Other causes were the complexity of the payment procedure and incorrect information on invoices, both of which can be tackled through the introduction of a robust e-invoicing system.

Electronic invoicing not only provides greater transparency but it can also help to speed up payment, as e-invoicing networks guarantee instant delivery.