Trade Payables: A Guide for UK Businesses Considering BNPL and Trade Credit Solutions

Making sales and purchases on trade credit is a pretty common practice in all areas of B2B – after all, who doesn’t appreciate some extra time to settle their bills? However, delaying payments, whether they’re owed to you (that’s trade receivables) or money you owe, known as trade payables, adds a layer of complexity to managing cash flow, supplier relationships, and overall financial health. 

For UK businesses, the rise of B2B Buy Now, Pay Later (BNPL) and digital trade credit solutions has introduced new, simpler ways to manage these liabilities more efficiently. In this article, we’ll look at what exactly trade payables are, how to manage them, and how flexible financing solutions like iwocaPay can help keep you on track.

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What are trade payables and how do they differ from general accounts payable?

Trade payables and accounts payable are sometimes used as equivalent terms, but there’s a difference. Trade payables are short-term debts a business incurs when purchasing products or services, whereas accounts payable covers all short-term liabilities, including operational expenses.

In more detail, trade payables – or trade accounts payable – are the sums your business owes to suppliers for goods and services purchased on credit. These are normally things like inventory, raw materials, or other supplies directly tied to delivering your services or products.

While "accounts payable" is a broader term covering all short-term debts – including all trade payables – that a business can incur, including rent, utilities, and professional advice. 

For example, a construction firm’s trade payables might include invoices for bricks, timber, and cement, while their general accounts payable might include an outstanding invoice for consulting services to apply for planning permission.

How do trade payables impact cash flow and liquidity?

When structured effectively, trade payables can help your business hold onto cash longer, improve your cash flow and liquidity. Extending payment windows lets you use available funds for other purposes like growth, payroll, or other expenses, while still ensuring suppliers get paid on time.

However, adding on extended payment terms also introduces risk. Circumstances can change between taking on a trade credit agreement and actually making payments. Entering into too many trade payable arrangements can leave you with excessive short-term debt or lead you to miss payment deadlines. 

That’s a fast route to supply chain issues, credit report issues and strained supplier relationships.

How to negotiate favourable payment terms (Net 30, Net 60) and early payment discounts

Extended payment terms give your business more financial breathing room to manage your obligations, which is especially useful for trade payable expenses that are key to generating revenue.

However, payment terms are a two-way street, requiring sellers to put confidence in your ability to keep your promises and make payments on time. Here are a few ways you can improve your chances of favourable payment terms:

• Demonstrate your creditworthiness: Building your business credit score and other financial metrics can help your suppliers quickly judge your business health. Sellers are more likely to offer longer terms if they see you have a history of timely payments and a solid financial foundation.
• Invest in long-term relationships: Beyond financial metrics, experience can help build trust and value with your suppliers. The more they know you and your ways of working, with a proven history of honouring agreements, the more likely they are to be flexible with you.
• Buy trust with early payments: If you find yourself with strong cash flow, you may be able to negotiate discounts by paying early.
• Use trade credit technology: BNPL platforms like iwocaPay can help you arrange immediate supplier payment, while still offering you B2B instalment payments on a longer term than your supplier might offer, so you can manage cash flow on your terms.

Trade payables vs. trade receivables: understanding both sides of the ledger

When balancing your books, you need to pay attention to what’s going in, and what’s going out. 

In this context, trade payables represent what your business owes, while trade receivables are what customers owe you.

The key challenge for business owners is aligning payables and receivables effectively when it comes to payment volumes and terms. If your payables are due before you collect receivables, you could find yourself in trouble.

Imagine that a supplier requires payment within 30 days, but your customers typically pay in 45 days. This mismatch could lead to 15 days of awkward conversations and delays, damaging your seller relationships. Working with a solution like iwocaPay can help your customers spread payments over 3-12 months while ensuring you get paid straight away.

Best practices for managing and recording Trade Payables

The way you track and record your trade payables has a direct impact on your ability to assess your liquidity and cash flow, as well as ensuring you don’t miss any outstanding payments. Here are some tips to help you stay on top of your numbers.

1. Automate your invoice tracking: Capture and centralise all your most important information so you don’t miss a bill. Accounting software like Xero or QuickBooks can help you track due dates for all outstanding bills, as well as keeping an eye on when your own customers are due to pay.
2. Prioritise high-impact suppliers: When you’re deciding what to pay first, work out which suppliers are most crucial to your operations and ensure their invoices are settled first.
3. Reconcile regularly: Without a solid payment reconciliation process, it’s impossible to know how much cash you really have available, so make sure to cross-check supplier statements against internal records regularly.
4. Keep a payment calendar: Planning ahead gives you more flexibility. Look ahead to your incoming and outbound payments and align inflows and outflows where possible to smooth out cash flow.

Tools to automate and streamline trade payables

Managing your trade payables manually is slow and time consuming – and it creates extra chances for human error that can catch you out in future. Having a reliable technology stack can help you run things more smoothly.

• Cloud accounting for records and invoices: Tools like Xero, Sage and QuickBooks offer invoice tracking and automated payment scheduling to ensure you don’t miss deadlines.
• Direct debit tools: Platforms like GoCardless automate direct debit payments to prevent missed due dates, which can be especially handy for regular suppliers.
• B2B BNPL: If you want to pay suppliers on time, but delay your own payments, tools like iwocaPay can offer sellers instant settlement while spreading your costs over 3-12 months.

Balancing trade payables, healthy cash flow and supplier relationships

Trade payable arrangements need to work for both sides of the transaction. While you may want to secure long term trade credit where possible, your suppliers also need to think about their own cash flow. That’s where you need to balance your cash flow needs and the importance of your supplier relationships.

• Set realistic payment schedules: Defaulting or delaying payments is a sure way to upset your suppliers. The easiest way to avoid this is to not overcommit to early payments that aren’t realistic. Be upfront about your receivables and ability to repay and go with an arrangement that works for both sides.
• Stay in communication: If issues arise, communicate sooner rather than later. Discussing alternative arrangements, such as extended payment terms or partial payments, can buy you time and good will.
• Be generous when you can: If your cash flow allows, negotiate and take advantage of early payment discounts to reduce overall costs and keep suppliers on side.
• Adjust your payment strategies with circumstances: Market conditions change fast, so it pays to review your payables strategy to ensure it’s still in line with your business’s financial health and market conditions. If you find yourself with more or less liquidity, update your payment terms to avoid surprises for sellers.
• Use technology where you can: While trade credit is great for buyers, most sellers want to get paid upfront. iwocaPay for buyers can help you pay suppliers right away while still securing payment terms that work for you.

Should you offer BNPL or trade credit to B2B customers?

Offering trade credit can boost sales and customer retention, but it carries the risk of late or missed payments. That is where BNPL solutions like iwocaPay can help reduce risk by ensuring suppliers get paid upfront while allowing customers to spread payments.

For sellers, B2B BNPL can:

• Increase sales conversion rates.
• Encourage larger order sizes.
• Reduce the risk of late payments since funds are received instantly.

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What happens if you miss supplier payments?

Missing supplier payments can significantly hurt your business, damaging supplier relationships, potentially incurring interest on missed payments, lowering your credit or even leading to legal action like a County Court Judgement (CCJ).

Suppliers might shorten payment terms, impose late fees, or limit your future credit access, making it harder to manage your costs. Past that, repeated delays can impact your credit score, making future financing more expensive. In the worst cases, suppliers may prioritise other customers, reducing your options for essential materials.

Reduce trade payables risk with iwocaPay

If you’re buying on credit with any of your suppliers, you need to make sure you can meet your obligations, or risk damaging your relationships and credit. But keeping your cash flow and payables in line isn’t always easy – unexpected expenses arise, prices change or maybe you want to invest in a sudden opportunity. 

iwocaPay is the BNPL solution for B2B businesses that helps sellers get paid while giving buyers more flexibility. Get the materials you need and pay suppliers on time while extending your own payment terms.

• Extend your payment terms without increasing risk for sellers
• Build a healthy cash flow by spreading costs over 3-12 months
• Invest in supplier relationships by ensuring all payments are made on time
• Boost your purchasing power without stretching your cash flow.

Sign up for iwocaPay for buyers today to make your trade payables work for you.