UK small and medium sized businesses are owed £67.4bn in unpaid invoices , an increase of 8% from last year and 36% from £49.5bn in 2011, according to new research from the Asset Based Finance Association (ABFA).
The rise is due to the growth in the extent of overdue payments and extended payment times. SMEs are waiting 72 days on average for payment of invoices, which is blocking access to investment and growth.
The manufacturing and construction sectors have been hit hardest. Outstanding invoices from SMEs in the construction sector stand at £7bn, with businesses waiting an average 107 days for payment. Manufacturing businesses are owed £13.4bn by their customers and wait 61 days on average.
Paul Moorhead, insolvency practitioner with Moorhead Savage based in South Yorkshire, said he was not surprised at the figures.
“We are often approached by companies that are struggling to pay bills, pay their staff and pay the tax man, whilst they are owed thousands by their customers. Cash is the lifeblood of any business and without it, businesses will fail and be forced to close.
“Getting the fundamentals right from the start is essential. Many businesses don’t make their payment terms clear to their customers. They often don’t see the chasing of debts as a ‘proper job’ so it gets given to some unlucky person in the office, rather than seeing it as a vital part of their business and making sure that the credit control function is carried out by someone with the right skills and experience. Being firm with customers is really important and business owners have to know where to agree a few extra days to pay, or where to take legal advice to enforce a debt.
“If your business is struggling to pay its bills, whether due to slow payment from customers or any othe reason, it is vital to take advice as soon as possible to avoid a bad situation becoming a nightmare.”
For more information about how Paul Moorhead can help you solve your financial headaches, call today on 01709 331300.