More than half of respondents (57 percent) said that over the past year their company has delayed payments. This statistic concerns Esa Tihilä, CEO of Basware, and Hany Fam, president of MasterCard Enterprise Partnerships, whose companies have partnered to incorporate payment capabilities into a broad electronic invoicing network. “If a buyer is not paying his bills on time, he's causing trouble for his suppliers,” Tihilä says. “When this practice becomes widespread, it can have an impact on the whole economy. And we are seeing that now, in different countries. In the European Union, more than half of the economy is made up of small to midsize businesses. When these companies are paid late, that causes a cash flow issue. And we are seeing pretty significant effects in Europe.

“The level of predictability around a company's accounts receivable has a direct impact on the business's risk-taking behavior,” Tihilä adds. “When you have predictability in your cash flow, you are able to take risks and to make larger decisions, because you can count on what money is coming in, and when. On a larger scale, lack of predictability affects employment and affects consumption, which can have a huge impact on the whole economy.”

One of the survey's more interesting findings may be that 88 percent of all survey respondents—and 97 percent of respondents from the United States—believe that companies have a “social responsibility” to pay their suppliers on time. Globally, 40 percent of respondents believe that persistent late payment of invoices limits the flow of funds between employers and workers, 31 percent think it limits growth in the economy, and 13 percent believe it reduces employment. Survey respondents also see late payments as limiting the flow of funds between buyers and sellers (45 percent) and between companies and investors (37 percent). One in five (21 percent) believe it also increases taxes.

Many of these expectations are logical assumptions, considering that nearly half of the finance decision-makers who participated in the survey said their company would invest more in its business if every customer paid its invoices on time. And 35 percent said eliminating late customer payments would improve their own relationships with their banks. (See Figure 1.)

Nevertheless, 67 percent of all survey respondents, and 77 percent of those from the United States, admitted that their company has used payment terms as a strategic lever to help manage its cash flow during the past year. Nearly three-quarters indicated that they think late payment is an unavoidable fact of business life (72 percent of respondents from the U.S. and 74 percent overall).

“People agree that payments should be made on time,” MasterCard's Fam says. “But they're nervous, so they're using late payments as a means of cash flow management in times of uncertainty. In some cases, they're incapable of paying on time because they don't have adequate insight into their own cash flow coming in from people they're expecting payments from.” It's a vicious cycle, and one that Basware and MasterCard have set out to break.

“Lumpy cash flows are a function of lumpy orders and invoices,” Fam says. “And lumpy orders and invoices are a function of uncertainty in corporations. If companies can interact and transact and purchase and pay in a more consistent, stable fashion, that will have a positive effect on transparency of operations, predictability for the business, and even on the overall economy.”