SMEs have long been battling against late payment issues which play havoc with their cash flow and potential for growth. While this might be a difficult problem to solve completely, positive steps are being made to combat it. Small business representative bodies have recently gained the backing of the UK government in their attempts to cut down late payment to SMEs, adding some extra power to their measures and creating new agreements which will hopefully help to tackle the problem.
An agreement has been signed by members of the Government’s Small Business Economic Forum (SBEF) to commit to developing new processes and measures to make sure businesses are getting paid on time. Late payment can be crippling for small business, especially those lower on the supply chain, as not only will payment for their services be delayed, but this will feed their own late payment to suppliers – it’s a vicious circle, perhaps one of the reasons the problem is so widespread.
Many experts believe that the involvement of the government is key in addressing the issue of prompt payments. It’s often difficult for small businesses to hold any leverage over big businesses who they supply services to, as well as there being a multitude of reasons which can lead to delayed payment. Experts say that SMEs shouldn’t be bullied into accepting bad terms from their customers, and should aim to negotiate in order to reach a feasible agreement for both parties.
Invoice finance is one way to address late payment. Any invoice issued on a 30, 60 or 90 day basis can be factored, helping businesses to unlock the vast majority of the funds within 24hours. This is instead of waiting a period of weeks or months for a debt to be settled. Invoice finance in the form of factoring and invoice discounting can help to remedy a whole range of late payment situations.