UK SMEs missing out on over £250 billion of liquid cash flow

Slow and late invoice payments are costing UK SMEs billions of pounds of liquid cash flow, not to mention hundreds of hours a year in time spent chasing.

A new report from Siemens Financial Services (SFS) says that slow and late invoice payments mean SMEs in the UK are missing out on billions of pounds of liquid cash flow.

A typical SME spends 130 hours a year chasing outstanding invoices, equating to a cost of £10.8 billion per year. This cost, combined with the average value of unpaid invoices, equates to £250 billion.

When compared with, larger companies, SMEs continue to suffer from slow and/or late payments disproportionately because they tend to be positioned towards the end of the supply chain.
Businesses with an annual turnover of under £1 million wait on average 72 days for invoices to be paid.

Businesses with an annual turnover of between £1 million and £10 million wait on average 53-54 days. This is significantly longer than the largest businesses, which typically wait 48 days.

The problem is being compounded by 90 day payment terms demanded by larger organisations, which are becoming more common.

Although many companies view outstanding bills as an unavoidable drain on their cash flow, solutions such as invoice finance, help address the shortfall and can be used to unlock funding.

By using invoice finance, when a company invoices its customer, up to 90 per cent of the approved invoice total is straightaway advanced by the finance provider, with the remaining ten per cent paid once the customer settles the balance.

Whilst companies still need to ensure they receive payment from the customer, invoice finance provides them with the essential working capital to enable other projects, such as business expansion, without having to wait for bills to be paid.

Ian Cole, head of invoice finance, Siemens Financial Services comments, ‘SMEs make an important contribution to the economy, accounting for 47 per cent of all private sector turnover, yet they continued to plagued by lengthy invoice terms and late payments.

‘These continuing problems mean that an increasing number are looking to invoice finance as a solution. Indeed, figures show that invoice finance continues to grow in popularity; funds provided to SMEs recently exceeded £20 billion for the first time.’

Further reading on liquid cash flow

Owen Gough, SmallBusiness UK

Freddie Halvorson

Owen was a reporter for Bonhill Group plc writing across the and titles before moving on to be a Digital Technology reporter for the

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