Late payments to blame for SMEs missing out on £250 billion in liquid cashflow
The UK’s network of small firms is missing out on around £250 billion of liquid cashflow, and late payments are the primary reason why, new research claims.
According to Siemens Financial Services, the average firm will spend 130 hours a year chasing payments they are owed, which equates to a cost of £10.8 billion annually.
For the purposes of the report, that figure was then combined with the average value of unpaid and overdue invoices, which produced a total that equates to £250 billion.
Smaller firms also suffer disproportionately from these issues when compared to their larger counterparts and the report suggests this is due to their position towards the end of the supply chain.
At the same time, these firms tend to operate on much reduced finances, so any financial issues can be exacerbated to a much greater extent.
When it comes to payment times, firms with turnover of under £1 million ten to wait longest for their invoices to be paid – the average time taken for firms of this size was 72 days.
That compares to between 53 and 54 days for those with a turnover of between £1 million and £10 million, and 48 days for larger businesses.
Longer payment terms have also grown in popularity among larger firms in the past few years, and this was found to be compounding the problem.
Such is the scale of the late payment problem that many businesses now consider it to be part of regular operations, but doesn’t make financial management any easier.
Those fearing financial strife should consider the services of an insolvency practitioner to discover the best course of action to take.
Invoice finance, asset finance and a range of other options exist to help overcome trading difficulties, and the use of many of these options is on the increase.
By Phil Smith