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Delayed settlement of customer invoices can be a challenge for any company, however the problem is often particularly acute for SMEs.

Many smaller businesses do not hold large cash reserves and therefore have less leverage to negotiate with compared to bigger firms who are better placed to dictate terms, without worrying about affecting long-term relationships.

For the wholesale and distribution industry, these conditions can be especially problematic. The sector is noted for being a key link in the wider supply chain. Traders are often reliant on payments to reimburse their own suppliers and keep vital goods available to others.

Late payments and long payments terms

The cause of many SME cash flow problems are either late payment or onerous long payment terms.

Long payment terms are typically considered to be anything more than 30 days. Recently, many industries have seen a trend toward 60 or 90-day conditions. These tend to be favourited by bigger organisations and are not sympathetic to the cash flow challenges facing small and medium sized operations.

In comparison, late payments are those which exceed agreed trading parameters. Many companies have also noted an increase here over the last decade. In the wholesale and distribution sector, a quarter of businesses challenged by this issue estimate they are owed over £40,000 in late payments.

For many, these problems create a difficult choice: accept extended payment terms which could be difficult to manage, or turn down a job and don’t get paid at all. Even trying to negotiate better terms can be a challenge because if you do not accommodate a big company’s whims, a competitor may.

How much money do you estimate is owed to you in late payments?

  All SMEs* Wholesale and distribution*
Less than £20,000 26.9% 21.9%
Between £21,000 and £40,000 41.7% 43.8%
More than £40,000 26.7% 25.0%

*Of all businesses that have a problem with late payments

Wholesale and distribution industry

Close Brothers research found that both the manufacturing and wholesale industries find late payments around 7% more problematic than the average SME in the UK. Given that these sectors must continually reinvest to provide products for their own clients, it is perhaps unsurprising that they are most reliant on efficient customer remittance.

Wholesale and distribution companies cited similar concerns about late payments. Businesses from both sectors said that they make cash flow hard to manage, that they force them to spend time chasing money and, concerningly, that they significantly impact their ability to trade.

Are late payments a problem for your business?

  All SMEs* Wholesale and distribution*
Yes 47.4% 53.1%
No 52.6% 46.9%

*Of all businesses that have a problem with late payments

Invoice finance

If your business is managing extended periods without payments, you may find invoice finance helpful. A factoring or discounting facility gives companies access to cash tied up in their unpaid customer invoices as soon as they are raised.

This type of funding enables businesses to have more control of their cash flow, providing the reliability and security they need to thrive.

*These statistics have been updated and are corrected as of February 2020.

Contact us

Close Brothers Invoice Finance
Ridgeland House
165 Dyke Road, Hove
East Sussex, BN3 1UY

T: 0127 305 9530 *

*Freephone from landlines

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