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Improving Payment Times

Late payment has long been a problem for SMEs, especially those which are caught up in supply chains. However, data from Experian has shown that this is improving with payment times shortening compared to this time last year. This is good news for SMEs, especially as this improvement is especially evident amongst larger businesses. SMEs dealing with large companies are often kept hanging on for payment, restricting their cash flow and making day to day running tricky.

Data from Experian shows that UK businesses paid their invoices on average nearly two days earlier than the same period in Q2 of 2011. This year, firms have been paying their overdue invoice 23.38 days after agreed terms, compared to 24.59 in Q1 and 25.23 days in Q2 of 2011.

The biggest improvements in payment time came from firms at the larger end of the scale – promising news for SMEs who supply big firms with materials and goods. Firms with 50 to 100 and with over 501 employees paid their bills nearly two days quicker than in Q2 of 2011, while companies with 101-500 employees paid nearly two and a half days quicker than Q2 of 2011.

This shows that the gap in payment times between the UK’s biggest and smallest companies is beginning to narrow. This has been getting smaller since the final quarter of 2011 – the difference stood at nearly 20 days in 2009, but this has now decreased to under 12 days in 2012. This is the third consecutive quarter of improvement in payment times, showing that cash flow amongst companies of all sizes is starting to improve.

Cash flow is one of the most important things to consider for SMEs, and so improvements in payment time is very encouraging news.

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