Late payment has become a huge problem for SMEs. As well as having to cope with an ongoing tough economic climate, businesses are having to cope with customers waiting longer to pay their invoices, something also motivated by tough economic times. The BACS Payment Scheme has recently shown the extent to which this has become true across all nature of businesses.
The survey revealed that 6 in 10 SMEs are suffering from late customer payments. On average, customers are waiting 45 days beyond their credit terms before clearing their debts. This is putting a huge strain on businesses. Cash flow tightens, it becomes difficult to pay bills, and the wait is passed down the line to your own suppliers.
Often, it is big businesses stretching out payment terms – in a supply chain, an SME will often be supplying services or goods to a larger company and they will find themselves unable to leverage a quick payment. That large businesses often take so long to pay is somewhat ironic as they can most often easily afford the bills and are actually more able to pay on time than smaller businesses.
If your business is waiting over 70 days for payment of 30 day invoices then chances are you’ll need some sort of finance to bridge the gap. Rather than looking for loans or overdrafts to cover the shortfall at the end of the month, it might be worth looking in to invoice discounting or factoring. These are flexible ways to cover cash flow problems and are specifically designed to be able to solve the issues caused by late customer payment.
With invoice finance, your business could unlock up to 90% of the value of a customer invoice within 24 hours. Rather than wait months for payment, you can get access to the funds quickly and without a lengthy application process. If your business is struggling with late payment, then invoice finance could be the option for you.