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Late Payments Once Again Rearing its Ugly Head


The lawsuits are flying again. Yet another supplier is suing one of its buyers over non-payment. The case is nothing new.  In the face of global currency fluctuations and market volatility, many companies are struggling to make timely payments, and even worse, squeezing their suppliers or extending payment terms without realizing the potential negative impact on their extended supply chain and ultimately, their business. 

When buyers focus on hoarding cash, suppliers become less flexible in their negotiations, eyeing badly-needed present revenue over long-term growth. They give less, spend less, and in doing so, gain less. It’s a lose-lose situation. But it doesn’t have to be.

Technology has transformed nearly every aspect of our personal lives. It’s time to put it to use to create a win-win scenario for buyers and sellers alike.

Take late payments. Some companies blame the problem on department or process issues. But this is really just an excuse. 

If, for an example, the issue of paying suppliers late is an AP problem, there’s an easy fix:  digitize the process.  Invoice automation not only speeds the approval and payment of supplier invoices, but provides opportunities to optimize their working capital by creating a significant payment window.

And then there’s dynamic discounting.  Buyers who have the capital to do so can offer to pay suppliers early in return for a discount. They earn an immediate – and better return on their cash than they would by simply parking it in traditional, low-return liquidity vehicles. Their trading partners, in turn, can use the cash to fund their daily business needs and ensure they can meet their customer’s ongoing demands.

Supply Chain Financing (SCF) is another option. As the gap between low-quality and high-quality borrowers grows, more suppliers will experience cash flow problems. Forward-looking buyers willing to come to the rescue of their most important partners can use their good credit rating to help them borrow at lower rates than they could achieve on their own and create a healthier and more productive relationship.

In today’s economy, digital technologies are the onramp to innovation and success. If you want to be among the winners, you need to get on the highway and go fast. Start today by reimagining your payments process and developing collaborative strategies that create value for all parties involved in it. In doing so, you’ll deliver your organization to new worlds of excellence. 

Robert Banther is Manager, Solutions Marketing, for Ariba, an SAP company.  He is responsible for solution marketing programs that educate finance, procurement, supply chain, and other business professionals on the transformational potential of the Ariba Network and Ariba’s cloud-based financial solutions.

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