Outstanding invoices for SMEs tops £586 billion

The UK’s army of small and medium-sized businesses are owed more than £586 billion in outstanding invoices, new research has revealed.

According to Lloyds Bank Commercial Banking’s Business in Britain report, the average small firm is owed more than £108,000 in unpaid invoices.

This will be particularly concerning giving it is a rise of 8% on figures from January this year, while nearly a third of firms say late payments are the largest cause of cashflow  issues.

More than 1.5 million companies are now owed more than £200,000, which is up from 1.3 million companies at the start of 2016.

Three in ten businesses expect customers to defer payment terms in the coming six months too, suggesting the issue is showing no signs of abating.

It isn’t all bad news for the UK’s small businesses though, as the total amount of assets that they owe has increased – they now own £2.6 trillion of assets outright combined, equating to an average of nearly £490,000 each.

This is a jump of around 4%, or £18,000, from January, while investment is also up and could increase further in the year ahead.

Businesses suggested they were going to invest an average of £1.5 million during the next six months, which comes despite Brexit and the resultant changes in the economy.

The report suggests that a poor understanding of alternative finance options may delay the investment though.

Just a third of SMEs said they were aware of asset-based lending while two in five were aware of invoice finance.

The big issue facing smaller firms is the payment gap between receiving payments for goods and services and investing to continue growth.

For those operating on small margins, it can push them towards insolvency if they are unable to source finance to remedy their situation.

While understanding their options is important, it is also imperative the firms actively chase the money owed to them.

Regional differences were noted in the levels of outstanding invoices, with those Wales owed nearly twice as much (£150,000 on average) that firms on the south coast in Kent, Sussex, Hampshire, Surrey and Dorset (£80,000 on average).

By Phil Smith

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