Late payments still causing problems for SMEs

MORE than a quarter of small and medium-sized enterprises (SMEs) in the West Midlands are suffering from cashflow problems.

The latest research from Lloyds TSB puts the number of SMEs worrying about cashflow at 27%, with well over half (56 per cent) citing late payments as the main cause.

However, this is lower than the national average of 60 per cent of businesses blaming delayed payments.

The data, taken from the bank’s bi-annual ‘Business in Britain’ survey, questioned more than 1,800 firms across the country in a variety of sectors about issues affecting them.

Locally the number of companies experiencing cashflow problems has decreased by 7% and those citing late payments have dropped by 4% when compared to the previous six months.

Companies operating in construction, manufacturing and professional services are worst hit by late payments with 76%, 69% and 67% respectively citing this as the main cause for cashflow issues.

Lloyds TSB Commercial Finance, the invoice finance arm of the bank, expects the number of companies affected by late payments to rise, as factors such as higher taxes, increasing fuel prices, and wider economic uncertainty due to the Eurozone debt crisis continue to stretch working capital.

Martyn Freshwater, regional director for Lloyds TSB Commercial Finance in West Midlands, said: “These results are encouraging for the region, especially as the wider economy is tough for businesses across all sectors and sizes.

“However, companies should still act prudently by chasing invoices and credit checking potential customers, to ensure their firms are not adversely affected by late payments.

“We expect to see invoice finance and, in particular, factoring, increasing in popularity in 2012 to combat the problem of late payments and the knock on effects it inevitably has on a firm’s day to day liquidity and future prospects.”