Payment issues causing SMEs increasing woe

Issues surrounding payments in various international markets are holding back many SMEs, according to a new survey.


International SME funder Bibby Financial Services surveyed 1,000 small businesses and discovered inconsistent payment regimes exist across many countries and regions.


As a result, many SMEs are struggling to maximise their trading potential and could be losing out on considerable sums of finance as a result.


Potential for insolvency


This is opening up the possibility of insolvency practitioners getting involved for some companies who struggle financially when they are owed considerable payments.


For example, in Germany, 79% of businesses require customers to pay bills immediately and only a few offer credit terms that allow for payment after 30 or 60 days.


Compare that to the UK where only 24% require immediate payment, with many more keen to offer credit terms of 30 or 60 days.


The European Commission is attempting to standardise payment terms through its Late Payments Information Campaign and the Late Payments Directive.


Processes vary even more in the rest of the world, as about half of US companies require immediate payment whereas 60% of those in Singapore are happy for customers to delay payment.


Dealing with different expectations


Meanwhile in Hong Kong, one third of SMEs expect immediate payment while the rest want payment between 30 and 90 days.


The survey discovered that small firms in Germany and the UK struggle more than most to maximise their trading opportunities.


“The fractured nature of the payment landscape around the world is creating barriers for SMEs,” said Simon Featherstone, global CEO of Bibby Financial Services.


“While more harmonious payment regimes will not be created overnight, the necessary steps are eminently achievable.


He pointed to the need for companies to align their payment methods with local companies to ensure swift payment practices while lowering the risk of insolvency or receivership.


“Policymakers should also examine what could be done to harmonise conflicting regimes,” he explained.


“Taking action to remove these barriers would deliver real benefits. It would boost SME activity, create jobs and kick-start economic growth."


By Phil Smith


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