Government offers support on late payments: but SMEs must still help themselves

As part of the Queen's Speech the Enterprise Bill offered support for small businesses hampered by late payments: but even with added help these companies must take action to tackle the problems themselves.

Last week’s official announcement of the Conservative enterprise bill to assist small businesses in settling late payment issues and disputes comes at a time when SMEs are looking to the Government for support.

But until businesses have no other option than to operate fairly SMEs will still fall victim to foul practice and bullying within their supply chains.

Hitachi Capital Invoice Finance’s data on client debtor days shows that the worst offenders take up to 121 days to make payment.

The picture is much bleaker than many could imagine when it comes to late payments affecting small businesses. One in three of our clients come to us with payments being settled after 60 days, which when considering that a large proportion operate with a turnover less than £750,000, is debilitating to any business that hasn’t sourced financial help.

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The impact means many SMEs are unable to reach their growth potential because they are too cash-poor to invest in growth and their time is consumed by chasing invoices and managing cash flow. And unfortunately, until businesses are given no other option than to pay on time, SMEs are going to continue getting caught up in this inward cycle.

Hitachi Capital Invoice Finance‘s data shows that of those waiting beyond 60 days, for almost one in five (18%), it takes between 90 and 112 days for payments to be settled. 

The Asset Based Finance Association (ABFA) has predicted that asset-based lending to UK and Irish companies will reach £20billion in 2015 and 80 per cent of that sum will be raised through invoice finance.

There’s a reason why the alternative lending market has grown substantially over recent years. We have seen a 22% increase in client growth year-on-year as SMEs look to implement invoice-lending arrangements and safeguard their financial positioning for the future.

All our clients come to us with outstanding invoices and we work hard on their behalf to reduce the impact of late payments on a business and the length of time an invoice goes unpaid. Our credit control services are just one way in which we help clients to reduce debtor days, and put them on a level playing field with some of their larger customers.

Further reading: Does altfi herald a golden age for small business?

Praseeda Nair

Praseeda Nair

Praseeda was Editor for from 2016 to 2018.

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