Here at Commercial Domestic Investigations we understand the implications that late payment can have on a SME.
In this blog post we look at new research from the Asset-Based Finance Association (ABFA) which suggests that late payments towards small to medium sized enterprises are a growing trend.
The amount believed to be owed to SME’s now stands at approximately £67.4 billion. This has gone up 36 per cent from £49.5 billion in 2011, and 8 per cent higher than last year’s figure.
The most affected
On the whole, construction and manufacturing business are the worst affected.
Late unpaid invoices account for £7 billion in the construction sector alone, amounting to 16 per cent of the industry’s annual turnover. It is a similar situation for manufacturing businesses, who are owed £13.4 billion – 17 per cent of their yearly income.
72 days is now the average length of time it takes for an invoice to be paid – 11 days longer than the figure in the height of the recent recession, when you would have probably expected more businesses to have trouble paying bills. Again, construction business are generally the hardest hit, and have to wait an average of 107 days for payment.
Jeff Longhurst, chief executive of the ABFA, said “The scale of unpaid invoices to Britain’s small businesses has become enormous, but there is no reason for it to become a barrier to investment and growth.
“Businesses need to recognise that their unpaid invoices are an asset. In many cases, they are the most valuable asset a business has, and they can be the key to unlocking critical and affordable funding.
“Invoice finance is playing a bigger role than ever in funding British and Irish businesses’ growth, and it is now an established part of the funding mix for a huge number of small businesses. But it can also help many more businesses.”
The practice of invoice financing, where businesses can sell on their debts, may secure them a lower overall amount of income, but many find the sacrifice to be worth it if it means that they can have immediate access to the money needed to keep their business running.
Impact on SME’s
When income is withheld from SME’s, it is obviously going to have a negative effect on cash flow. The government has recently promised to tackle the issue, and has announced plans to create a dedicated small business commissioner role (which we discussed in an earlier post).
While there has yet to be any concrete action regarding the effects of late payment, it appears that the government are taking it increasingly seriously, and that some changes are likely in the relatively near future.
About Commercial Domestic Investigations
Commercial Domestic Investigations are regarded within the debt collection and credit control industry as one of the best credit management companies in the UK. Established in 1988 to support and service all sizes of companies in the field of Credit Management.
Primarily our clients use our automated Debt Collection Services, but over the last eighteen years clients requirements have changed dramatically, something Commercial Domestic Investigations has addressed.
We now boast a national client base in excess of 30,000 companies. Commercial Domestic Investigations has grown by listening to clients’ requirements and adapting our services to meet all companies’ needs from Sole Traders, SMES, Ltd and Plus. Please contact us on 08444 159200 for more information.