RATES, RED TAPE AND RELUCTANT PAYERS…2007 FOR SMEs
By David Thomson, CEO, Close Invoive Finance

An ever increasing number of small businesses are experiencing problems with late payments.
Figures released by BACS show that 59% of SMEs have experienced problems with delayed customer or supplier payments at some time. This number is almost double that of the findings in 2004 which showed just a third of SMEs had experienced some sort of delayed payment.
The research also shows that the total amount of money owed to smaller businesses is on the increase. Collectively, the average amount of money outstanding to companies with 250 employees or less has rocketed from £11 billion two years ago, to almost £16 billion. This finding compliments that of insurer Hiscox. Its inaugural SME Risk Barometer reveals an SME sector under considerable pressure, with cashflow concerns cited by 57% of respondents.
Some entrepreneurs are putting their businesses and even their family’s homes at risk by using personal credit solutions to shore up their firm’s funding. Companies are also fearful that an important customer would switch to a rival supplier if they insisted on their right to Late Payment Interest
A recent web poll by the Better Payment Practice Group found that of 420 respondents, 69% were worried that they may lose an important customer to a business rival if they insisted on prompt payment. This fear was strongest in the smallest businesses. However, 31% of businesses thought the prospect of losing business were outweighed by the advantages gained by their right to claim interest on late payment.
But it is not necessary to use such risky forms of funding. In many cases they can raise the cash they need by optimising cash flow through leveraging the assets tied up in unpaid invoices, known as factoring.
Companies know they will be paid immediately and they can use this cash to either invest in the business or pay off their own creditors. That way, they don’t have to dip into their own finances. Factoring also frees up valuable management time as all credit control is managed by the factor. On top of this, rising energy costs and steadily increasing rent bills are other real concerns facing the UK’s small businesses.
Four out of five small firms in the UK are concerned about the ever-increasing amount they have to fork out to cover overheads.
Expenditure on business taxation, such as local business rates, VAT and national insurance was revealed to be the second biggest concern troubling small businesses in the UK.

return to business media articles