Number of unpaid invoices continues to rise

Small businesses in the UK are owed £67.4 billion collectively in unpaid invoices, marking an increase of 8% from a year ago.

The figure is also 36% higher than the £49.5 billion that was owed in 2011, according to research from the Asset Based Finance Association.

It signals that the situation for many businesses is not improving despite Government efforts, which in turn is leaving many firms facing severe financial pressures.

Two major factors are credited with the worsening position of the UK’s small businesses – namely the growth in the extent of overdue payments and an extension of payment times.

The average SME is now waiting 72 days for invoice payments which is inhibiting growth and blocking potential routes to investment.

Even at the height of the recession in 2009 the wait for payments was only around 61 days on average, showcasing how the situation has deteriorated.

Firms in the construction and manufacturing sectors have been hit hardest, as outstanding invoices in the former currently total £7 billion and take up to 107 days on average to be paid.

The waiting time in the manufacturing sector is less at only 61 days on average, yet businesses are owed £13.4 billion.

Importantly, the figures only reflect around 180,000 SMEs who have detailed accounts, meaning the true level of overdue invoices could be far higher.

Late payments can impact all along the supply chain as a delay in payments will often slow other billings as companies will be unable to pay until they themselves receive funds.

While late payments can be cause of concern to businesses, and could lead to the threat of business insolvency if not resolved, they could open up an option for alternative funding.

Affordable funding options may be available to resolve a situation while insolvency practitioners can advise on other avenues that could be explored.

ABFA added that companies are currently not opting to access finance that can support growth, despite a positive economic outlook.

By Phil Smith

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