Small firms continuing to struggle as a result of late payment

SMEs in the North West are owed an average of £101,170 in outstanding invoices, according to a report.

The latest Business in Britain report from Lloyds Bank Commercial Banking highlights an increase of 6% since the last Business in Britain report in January 2016, with 33% of firms citing late payments as the biggest cause of cashflow problems.

The report also found that 26% of North West firms are currently owed more than £200,000 in outstanding invoices, up marginally from 25% in January.

The issue of late payments is also likely to persist into 2017, with 34% expecting more customers to require deferred payment terms in the next six months.
 
Meanwhile, North West companies owned, on average, £450,027 in assets outright. This is an increase of 8% since the start of the year.

Firms said they were expecting to invest an average of £374,090 into their business over the next six months, up from £314,270 in January, suggesting a majority of companies remained undeterred by recent political and economic shocks.

However, these investment plans could be being held back by relatively poor awareness of different forms of lending.

Only 48% of firms surveyed for the report said they aware of invoice finance, and 38% of SMEs were aware of asset based lending.

Richard Evans, area director at Lloyds Bank Commercial Finance, said: “If businesses are issuing more invoices and investing in more assets, then this is very positive for them and the economy.

“But if companies are having to wait longer to be paid, and are reporting that they expect to face an even longer wait in the future, this slowing of payments could be holding businesses back from releasing critical cash to drive future growth.

“The amount of money that firms have tied up in unpaid bills and other assets is significant, and this report suggests that these sums could be unlocked if businesses were more aware of the funding options that are open to them.”

Invoice finance allows businesses to access the money they are owed in unpaid client bills very quickly, often within 24 hours, freeing up cash that can then be used to help catalyse growth and to help invest into capital expenditure.