When looking at the SME sector, there are a few problems that are especially widespread. One of those is late payment problems, which many small businesses suffer from. Invoice finance measures such as factoring and invoice discounting can help to limit cash flow problems, by freeing up funds that would otherwise be out of reach for months.
Late Payment Problems
A recent survey has shown that 51% of companies interviewed found late payment to be a problem. Nearly a quarter of those interviewed also found late payment to be a serious problem, with 16% saying that they had nearly been put out of business by the issue.
The domino effect of late payment problems is one of the most serious and most unavoidable parts of the problem. Supply chains mean that if one part of the chain is late in payment, all other parties will be affected by late payment.
This all means that preventing late payment problems is paramont. Phil Orford, Chief Executive of the Forum of Private Business, said, “We need to do two important things – first, communicate to businesses exactly what they can do to proactively minimise late payment, including putting in place robust cash flow management procedures and even invoicing properly and one time. Then we need to provide the support and services they need to make tackling late payment a standardised business procedure.” He went on to say there needs to be measures to make big companies pay their smaller suppliers on time, ensuring this practice spreads down the chain.
Clearly, taking proactive measures against late payment is important. Invoice finance can help to limit cash flow issues and can get funds within 24 hours. If your business is left hanging for payment on a regular basis, alternative finance measures such as invoice discounting should be top of the list for helping with your cash flow problems.