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Bob Glotfelty, chief growth officer at Taulia, provides insights into the working capital solutions provider’s latest survey findings, shedding light on business strategies amidst economic uncertainties and the value of early payments.

 

It’s no secret that the last year has brought a myriad of challenges for businesses around the world. Central banks tackled high levels of inflation by hiking interest rates, piling on pressure for companies in need of funding. Supply chains were disrupted not only by geopolitical tensions, but also by extreme weather events, including wildfires in Canada, record levels of rainfall in Beijing and soaring temperatures in southern Europe.

Of course, every year comes with its own set of challenges. As 2024 finds its feet, there’s no denying that uncertainty continues to be a key theme – not least because a record 50 countries are expected to hold elections over the course of this year, with as many as two billion voters going to the polls.

But alongside the obstacles presented by the current landscape, there’s also plenty for businesses to feel positive about. As the threat of a global recession recedes, companies across different sectors and geographies are approaching the months ahead with a sense of optimism, with many setting their sights on harnessing opportunities for growth.

 

Highlighting business challenges

These topics, and their impact on businesses around the world, were illustrated by the findings of Taulia’s 2023-24 Supplier survey. Shining a light on the challenges of the current business landscape, the survey revealed how businesses of different sizes are being impacted by a variety of issues, from harnessing growth opportunities to mitigating the impact of late payments. Crucially, it illustrated the valuable role that early payments can play in helping businesses navigate choppy economic conditions while pursuing growth ambitions.

This year’s survey attracted responses from 11,968 respondents in a variety of job roles, including accounts payable, accounts receivable and treasury. Respondents came from 132 countries and represented a wide range of sizes, from small and medium-sized businesses to large enterprises. Almost half of this year’s respondents work for companies with less than US$10mn in annual revenues.

 

Mitigating inflation, harnessing growth

Topping their concerns was inflation, which was cited by 50% of the survey’s respondents. Inflation may have subsided from the record highs experienced in 2022 in markets like the US and the UK, but it remains notably higher than target rates. This, in turn, has implications for the costs businesses face, including raw materials and energy. Unsurprisingly, other notable challenges cited by respondents included interest rates (32%), supply chain disruption (22%) and geopolitical issues (20%).

But while the macroeconomic environment is undeniably challenging, the survey also revealed that many businesses are looking ahead with positivity. 85% of those we polled were optimistic about the year ahead – up from 60% in 2022 – and almost half (48%) said they were focusing on growth.

 

Late payments are on the rise

The survey also looked at how businesses are being affected by late payments. While late payments can be problematic in all types of market conditions, it’s important to note that their impact is all the greater when inflation levels are high. If an invoice is paid very late in an inflationary environment, the value of the funds received can be significantly less than when the invoice was issued.

Between 2016 and 2019, our previous surveys indicated a gradual reduction in late payments. But this trend seems to have reversed in the last couple of years, with more businesses once again experiencing late payments. This year saw the highest level of late payments since the survey began 10 years ago:

  • 51% of the survey’s respondents said that they receive payments late from their customers on average, up from 50% last year and 36% in 2021.
  • More than a fifth said they receive payments more than 30 days late.
  • 8% said they receive payments more than 45 days late, up from 3% in 2019.

At the same time, the portion that receives payment either early or on time has fallen from 56% in 2021 to 44% in 2023. Only 3% reported receiving payment early.

 

The value of early payments

Given the unwelcome resurgence of late payments, it’s unsurprising that interest in accessing early payments via programmes such as supply chain finance and dynamic discounting is continuing to grow. A quarter of those we polled said they were interested in taking early payments every time and for every customer, up from 20% last year. Meanwhile, six in 10 said they were interested in taking early payments at least some of the time.

Likewise, the survey found that businesses are taking early payments more frequently than they may have done in the past: 42% said they usually accelerate payments on a monthly basis, up from 39% one year earlier.

Early payments can play a critical role in helping businesses navigate challenges and economic volatility, helping them access the cash they need to do business while increasing the predictability of payments. Those who provide early payment options to their suppliers can benefit too: strengthening supply chains and improving relationships with suppliers can mitigate the risk of possible disruption.

 

Bridging the cash flow gap

There are many reasons why businesses choose to accelerate payments through programmes such as supply chain finance and dynamic discounting, as the survey illustrated.

For one thing, early payments can help to bridge cash flow gaps, which may arise if the company needs to pay its own suppliers before receiving payment from customers. As in previous years, filling a cash flow gap was found to be the top reason for taking early payments, cited by 52% of respondents.

But as the survey also demonstrated, businesses can use early payments to address a range of other challenges, including working capital needs (31%), payment predictability (27%) and reducing days sales outstanding (11%).

 

Trusted brand and best-in-class technology

This annual survey also allows users to rate their experience using the Taulia platform, with 95% describing their experience as neutral, positive or very positive, and eight out of 10 rating their experience as positive or very positive.

Across all company sizes, experience scores – which are analysed on a scale of one to five, with one being very negative and five very positive – were either the same as or higher than in 2022. This reflects Taulia’s ease of use, our trusted brand, and our investment in best-in-class technology with SAP’s support.

 

Harnessing early payments

The challenge of late payments is not a new one. But as the survey revealed, today’s businesses are experiencing more pressure than ever as a result of late payments. The rationale for accessing early payments has never been clearer – and businesses are embracing the opportunity to overcome cash flow gaps and working capital challenges.

The last year has brought no shortage of macroeconomic challenges, alongside supply chain disruptions and geopolitical conflict. But despite these challenges, businesses have continued to access early payments through Taulia’s platform, highlighting the value of the platform to trading partners, buyers and suppliers.

In the coming months, we expect to see businesses taking steps to mitigate the impact of inflation and higher interest rates – but crucially, they will also be focusing on growing their businesses. Early payments can play a vital role in helping companies on both counts: by unlocking cash flow they will be better placed to navigate economic challenges, while also accessing the funding needed to invest in growth.

 

To find out more, read the 2023/24 Supplier survey: https://taulia.com/resources/reports/supplier-survey-2023-24/