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SMEs and Late Payment Problems

Many small businesses suffer from late payment problems. This has become an overriding problem within the SME sector, with numerous companies going under due to cash flow problems exacerbated by late payment. With such a serious issue combined with the unavailability of bank funding for many businesses, alternative finance options are becoming all the more important. Invoice fianancing solutions such as invoice discounting and factoring are key in overcoming many prevailing problems in the small business sector.

Research conducted by credit agency Graydon and the Forum for Private Business (FPB) has shown that 51% of companies had been affected by late payment problems. This survey included 500 small business owners. Nearly a quarter of these said that late payment problems were a serious problem for their company.

65% of those interviewed reported that customers extended their payment terms without notice or consultation. A further 14% reported that customers were demanding discounts for prompt payments which had not been agreed beforehand.

Late payment issues create a domino effect down the supply chain. Of the 59% of interviewees who said they had paid their suppliers late, for whatever reason, 77% identified late payment from their own customers as the main reason.

Solutions for Late Payment

These types of issues can stifle companies, limiting their ability to grow, innovate and, in current circumstances, recover from recession. Formal credit control procedures can go some way to helping late payment problems, but it’s also important to look for alternative finance options, such as invoice discounting and factoring.

These two solutions can free up cash from those unpaid invoices securely, flexibly and quickly. Rather than wait a period of months for payment, you can get access to funds within 24 hours. Invoice finance is an ideal solution for a range of businesses, not only those who are struggling but those with healthy order books, looking to make the most of their invoices.

Select Factoring has a range of invoice finance options available for small businesses.


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