Invoice finance restrictions to be relaxed for small businesses
Britain’s small businesses waiting an average 72 days for invoices to be paid with an estimated £26bn owed in late payments
With Britain’s small businesses owed an estimated £26bn in unpaid invoices, the government has announced plans to relax invoice finance rules in early 2016 to make it easier for small and medium-sized firms to access invoice finance products.
The UK’s late payment culture has resulted in firms waiting an average of 72 days for invoices to be paid – one day more than a year ago, and on average 11 days longer than when the recession was at its height.
So-called “bans on assignment rules”, which can hamper the growth of smaller companies by preventing them from using invoice finance, are set to change as part of the government’s wider Small Business, Enterprise and Employment Act.
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Introduced early next year, the new measures will tackle late payment and help smaller firms grow and plan for the future from a more confident financial position.
More than 44,000 British businesses currently use invoice finance – cash up front against the value of unpaid invoices – to fund working capital and mitigate cash flow issues caused by late payments.
John Atkinson, head of commercial business at Hitachi Capital Invoice Finance, said of the announcement: “This change is long overdue and is an extremely positive step for the growth of Britain’s small businesses. Unpaid invoices are the biggest asset some small businesses have and the law has been unfairly stacked against them until now.
“For larger firms that practice late payment, time is running out and they now need to adapt practices or risk suffering reputational damage in the future. The logical next step might be for the government to outlaw those businesses that pay beyond 90 days. Research conducted amongst our clients revealed that pay beyond 90 days.”