Payment times are increasing: how to strengthen your company's cash flow

The most immediate impact of longer payment periods is on cash flow. Costs such as payroll, procurement and taxes are incurred on an daily basis, while revenue is only received once the customer pays. As a result, the business must fund operations upfront, even when the underlying transaction is profitable.

This distinction is critical: profitability reflects performance over time, whereas cash flow determines when funds are actually available. A company may report strong earnings yet still struggle to meet day-to-day obligations.

In effect, every invoice issued represents an interest-free loan to the customer. The longer the payment period, the larger that loan becomes.

The operational impact of delayed payments is felt quickly. Finance teams spend more time following up on overdue invoices, leading to increased administrative effort, more manual processes and higher indirect costs. At the same time, reduced visibility into cash flow makes planning less reliable.

For many businesses, this results in postponed investments or increased reliance on external funding. Focus shifts from growth and development to short-term liquidity management. Delayed payments can also serve as an early warning of an increased credit risk. A change in a customer’s payment behaviour may signal weakening financial health, increasing uncertainty for suppliers.

The impact of extended payment periods becomes particularly clear when quantified.

Consider the following example:

If your company invoices 500,000 SEK per month, this corresponds to annual revenue of SEK 6 million. With a 90-day payment period, approximately 1.48 million SEK is continuously tied up in accounts receivable.

With a 30-day payment period, the equivalent figure would be around 493,000SEK.

The difference, nearly 1 million SEK, represents capital that has been earned but is not yet accessible.

This capital could otherwise be used to:

• pay salaries
• fund investments
• absorb unforeseen costs
• pursue new business opportunities

Instead, it remains tied up while awaiting payment.

In some cases, the impact is even greater. Under arrangements such as reverse factoring, where large corporates finance supplier payables through third parties, the agreed payment period can extend to 75–93 days. For suppliers, this means waiting up to three months for payment.

Most companies recognise the challenge and actively try to manage it. Common approaches include:

Negotiating shorter payment periods
Often difficult, particularly when dealing with larger customers.

Bank financing
Overdraft facilities or loans can bridge liquidity gaps, but increase leverage and are constrained by repayment capacity.

Manual follow-up and collections
Internal resources are spent chasing payments, which is time-consuming, limits scalability and redirect focus from core operations.

Price adjustments
Some companies attempt to offset working capital constraints by raising prices, which can negatively affect competitiveness.

Contractual measures and late payment interest
These may improve payment discipline, but do not address the underlying issue, capital remains tied up during the payment period.

What these approaches have in common is that they tend to address the symptoms rather than the root cause. Capital remains locked in receivables, and credit risk stays with the supplier.

A more effective approach is to unlock the capital already embedded in your receivables.

Factoring allows you to sell your invoices and receive immediate payment, rather than waiting for customers to pay. Unlike traditional financing, this does not involve taking on debt, it is simply the conversion of an existing assets into liquidity.

With ONESOURCE Pagero Factoring, the process is seamlessly integrated into your existing invoicing flow. This enables you to:

• receive payment as soon as the invoice is issued
• transfer credit risk
• improve cash flow without increasing debt
• reduce administrative workload

All within your current system, without introducing new processes.

Every outstanding invoice represents revenue already earned. Each invoice also implies giving the customer time to pay, effectively an interest-free loan. When that capital becomes available immediately, it creates stronger conditions for both stability and growth.

Payment performance is not just an administrative question, it is a strategic one. A reactive approach, waiting for payments and addressing issues afterwards, is rarely sufficient.

Instead, companies need to take a more proactive approach to liquidity by:

• understanding how capital is tied up in receivables
• identifying risks within the customer portfolio
• building flexibility into their funding structure

At its core, this is about taking control over when cash is actually available.

ONESOURCE Pagero Factoring makes it possible to convert outstanding invoices into immediate liquidity within your existing e-invoicing flow. You gain greater control over cash flow, reduce financial uncertainty, and free up resources where they create the most value.