EDITOR ’ S QUESTION
SMEs are experiencing unprecedented strain on cash flow , with the rising cost of doing business , geopolitical uncertainty and soaring inflation exacerbating challenges , and late payments only adding further pressure . Growth Lending ’ s Don ’ t Bank On It report found that almost three-quarters of SMEs experience late payments from their customers , with one third being paid late on at least a monthly basis .
Of those SMEs that experience late payments from customers , more than two-thirds ( 67 %) have at least £ 50,000 tied up in late payments . Moreover , 30 % of those experiencing late payments from customers are owed between £ 50,000 and £ 100,000 and most shockingly , almost one in ten ( 9 %) have more than £ 1 million of capital unavailable as a result of unpaid invoices . This means that businesses are unable to access this money to tackle rising energy costs , combat soaring inflation or fund growth .
If SMEs are struggling with late payments , there are ways to alleviate the cash flow headache . Invoice finance , either whole turnover or selective , is one solution to release cash which is tied up in invoices . Some lenders also offer international invoice finance , which is specifically aimed at firms with debtors in currencies such as USD or EUR .
Aside from seeking funding to alleviate the impact of late payments , SMEs could allocate additional resource to credit control to help collect older debts and tidy up any administrative issues that may be causing delayed payments . Streamlining invoicing and payment processes will help to make them more efficient , meaning the customer is more inclined to pay on time and the business can easily keep track .
It is also wise for business owners to take out credit insurance , or bad debt protection , to mitigate against the risk of non-payment . Carrying out a credit check prior to taking on a new customer or client can also provide insight into whether late payments are likely to be an issue . Some businesses may also choose to implement late payment penalties to encourage clients to pay on time .
Our research found that nearly half ( 49 %) of SMEs are unaware of invoice finance as a form of funding . This means that a huge number of businesses could be missing out on an opportunity to alleviate cash flow pressures , and secure the capital required to tackle rising costs or pursue growth ambitions . Education is needed to increase awareness of the options available to SMEs struggling to shoulder the burden of late payments . �
VICKY TAYLOR , DIRECTOR OF DEBT FINANCE , GROWTH LENDING www . intelligentfin . tech
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