Late payments threaten SME recovery – Bibby

LATE payments threaten to dent confidence levels with the West Midland SME sector, a Staffordshire invoice finance specialist has said.

Bibby Financial Services said its own studies mirrored that of recent research suggesting business confidence was at its highest level since before the recession.

It said that in the West Midlands over a third (34%) of SMEs surveyed said they were planning for a healthy increase of up to 5% in their profit margin during the remainder of 2013.
 
However, it added that many firms risked not being able to achieve this margin because of the continued impact of late payments from large companies, with as many as a quarter (25%) of SMEs saying that more prompt payments would help them realise their aspirations.
 
Sharon Wiltshire, West Midland spokeswoman for Bibby, said late payment of invoices remained a common frustration for SMEs and could have a knock-on effect of restricting cash flow to other firms in a supply chain.

She said this was despite the introduction in March of the EU’s Late Payment Directive, which aimed to change the late payment culture in the business world and force companies to cap maximum contractual periods at 60 days.
 
“We identified late payment as a serious problem affecting the region’s SMEs at the end of 2012 and it is worrying to see that the problem is still hampering plans for growth in 2013,” she said.
 
“The result of late payment is a dent in working capital as firms look to fix the problem of slow paying clients with unsustainable sources of finance such as credit cards.
 
“While we are seeing encouraging macro-economic data, it is a different picture for smaller firms that make up the bulk of UK’s businesses. We are constantly working with SMEs to overcome funding challenges and understand their needs and frustration when it comes to this issue.”
 
She said that in order to address the challenge and ensure better cash flow throughout the supply chain, big businesses needed to act on their responsibility detailed under the Prompt Payment Code.
 
“Cash flow is the lifeblood of many small firms and tackling the administrative burden of chasing for invoices is crucial. I would therefore strongly recommend local firms look carefully at their order book, engage with their customers and seek advice on the best means of getting any overdue payments in,” she said.