Late payments taking longer than ever for small firms
The UK’s smallest businesses are having to wait longer than ever before for their invoices to be paid, according to a new study.
The Asset Based Finance Association, which represents the asset based finance industry in the UK and Ireland, suggests that businesses with a turnover of under £1 million are now waiting an average of 72 days for payment.
That is a full day longer than one year ago and comes against a backdrop of improving economic conditions.
In comparison, businesses that are turning over more than £500 million say their waits for payment have decreased by a day during the last year to an average of 47 days.
The figures mean that the UK’s smallest firms are waiting an average of 11 days longer for payment than they were at the height of the recession, leaving many facing financial and cashflow issues.
Back in 2009, the average payment time for invoices for small firms was around two months – or 61 days – meaning many are being forced to manage their money more effectively.
Those who do not are facing increasing cash flow difficulties, and even the threat of corporate insolvency, in instances where finances are not readily available.
This has an impact across the wider supply chain too, as funds are not accessible to pay clients and suppliers under the initial terms of contracts.
Many of these businesses still need to meet tax obligations, overheads and other invoices though, even in situations where they are yet to receive payments.
This is leaving these firms in a vulnerable position and increases the need for them to constantly chase for payments.
The ABFA has revealed its concerns relating to the current issues faced, as an improving economy should mean the situation improves rather than worsens.
The group suggests that the benefits of the recovery are not being equally felt across all businesses, so those chasing success are advised to look in to methods of managing their payments and invoices more effectively.
By Phil Smith