Behind the familiar headlines about supply chain disruption, a quieter threat continues to destabilize supplier networks: late payments.

Research from Creditsafe’s Cost of Late Payments report found nearly 86% of businesses saying that up to 30% of their monthly invoiced sales are overdue.

In an era where margins are already razor-thin and uncertainty is the new norm, the ripple effects of delayed payments can be just as devastating as a dockworker strike or a port closure. Late payments are the silent disruptor that’s eroding trust, liquidity and operational continuity across the supply chain.

Supply chains don’t operate in silos. Each tier, from raw-material providers to logistics firms, relies on predictable, timely cash flow. When a business fails to pay its suppliers on time, that delay ripples downstream, affecting everyone involved.

Consider a manufacturer waiting on a $70,000 payment that’s already 45 days overdue. That cash shortfall could mean delaying payroll, pausing production or missing supplier payments. For small and medium-sized suppliers, these disruptions are not only inconvenient but potentially catastrophic. 

This threat is growing, as 31% of businesses surveyed for our report said the problem of late payments has worsened in the past year. With rising costs from inflation and labor, many buyers are strategically delaying payments to preserve their own liquidity, essentially passing risk onto the very partners they depend on.

The Tariff Squeeze

Tariffs continue to complicate financial stability for suppliers, and the challenge isn’t just the additional costs — it’s that they keep changing. The ongoing fluctuations in trade relations, including tariffs on goods such as electric vehicle batteries, semiconductors and apparel, are creating a moving target for businesses to hit. These unpredictable changes make it increasingly difficult for suppliers to forecast costs, manage cash flow and ultimately ensure timely payments.

Recent developments illustrate how volatile this landscape has become. According to Newsweek, the timeline of U.S.-China tariffs continues to evolve, impacting industries from tech to fashion. For smaller fashion brands, as highlighted by Glossy, the financial burden of tariffs can be especially acute, often forcing them to absorb higher costs or shift their sourcing strategies entirely. This constant state of flux means that suppliers may need to renegotiate contracts, pass costs downstream or face delays in receiving payments themselves.

The crux of the issue isn’t just the added expense but the unpredictability. Payment punctuality can suffer when businesses are uncertain about their own cost structures, leading to a domino effect of late payments cascading throughout the supply chain.

Suppliers operating on tight margins and long production cycles are particularly at risk. When tariffs increase suddenly, they may lack the cash reserves to keep operations running smoothly, risking layoffs or production delays. In short, tariffs aren’t just a cost issue, but a planning nightmare, and the instability they cause can be just as damaging as the tariffs themselves.

The Bigger Red Flag

Not all late payments are equal. In fact, a customer who is consistently 30 days late might be less concerning than one whose payment behavior swings wildly from month to month. Our report highlights that erratic payments with sharp spikes and dips in days beyond terms (DBT) are a stronger predictor of financial distress than consistently late payments. (DBT is the average number of days a company takes to pay suppliers.)

Imagine a supplier whose customer’s DBT climbs from 12 to 57 over the course of just three months. That kind of volatility, especially when it goes unnoticed, can be an early sign of financial instability, signaling deeper issues such as cash flow problems, rising debt or operational mismanagement. And with U.S. business bankruptcies soaring to a 14-year high, recognizing these early red flags is more critical than ever.

Yet, many finance teams are still not set up to detect them. Only 38% of businesses in our study said they “always” analyze a customer’s trade payment history before signing a deal, and even fewer monitor existing customers for deteriorating payment behavior. Regularly tracking shifts in payment behavior, especially sudden changes in DBT, can give suppliers the advance warning they need to reassess risk before it’s too late.

There’s a natural reluctance to rock the boat with large, strategically important customers. Many businesses are willing to wait up to 60 days or longer to collect overdue invoices over $50,000 if the customer relationship is deemed valuable. Some might not even consider terminating a contract over consistently late payments. 

While loyalty has its place, overlooking warning signs in favor of relationship preservation is a risky trade-off. Late payments, especially from key accounts, can compromise a company’s ability to meet its own obligations, triggering layoffs, delaying expansion plans or even putting their own vendors at risk. Suppliers can’t afford to let loyalty override accountability. Strong relationships should be built on transparency and mutual reliability, not blind tolerance for financial risk.

How Suppliers Can Protect Themselves

With financial pressures mounting and payment volatility on the rise, suppliers need to act quickly to safeguard their operations. Following are a few actions every supplier should consider:

• Monitor payment behavior in real time. Set up automated alerts for customers whose DBT spikes, or who begin delaying payments more frequently.
• Assess customer financial health regularly. Use tools like business credit reports, payment history analysis, and trade references to evaluate customer financial stability and identify early warning signs of potential payment delays.
• Segment customers by payment risk. Identify and prioritize outreach to those whose payment behavior has grown increasingly erratic.
• Reevaluate payment terms. Be willing to adjust terms mid-contract if a customer’s financial health changes. 
• Educate sales teams. Make payment data part of the deal approval process. A big contract isn’t worth much if it goes unpaid.
• Prepare a collections contingency plan. Standardize communication protocols and escalation steps when invoices go unpaid, especially in high-risk industries.

Late payments don’t always make the front page, but they are a leading indicator of broader trouble. As the cost of doing business rises, especially in tariff-affected sectors, suppliers must maintain vigilance. Payment behavior is one of the clearest signals of a company’s financial stability or impending distress.

Supply chains are built on trust and timing. To keep them moving, we can’t afford to ignore what the data is telling us.

Steve Carpenter is chief operating officer of Creditsafe North America.