Value of late payment to Britain’s small businesses rises to £67bn

Manufacturing and construction sectors biggest victims of late payment culture

The amount Britain’s small and medium businesses are owed in unpaid invoices has risen by 36%, from £49.5bn in 2011 to £67.4bn this year, according to research by the Asset Based Finance Association (ABFA).

The figure has also increased by 8% from the £62.5bn owed last year, with firms now waiting an average of 72 days for payment – 11 days longer than at the height of the recession in 2009.

The ABFA claims that the true value of unpaid invoices could be much higher, as the estimate is based only on the 180,000 small businesses that submit accurate accounts.

The research also revealed construction and manufacturing to be the sectors with the biggest late payment problem. The value of unpaid invoices in construction is currently £7bn, equating to 16% of annual turnover, while small manufacturing businesses are awaiting £13.4bn, or 17% of annual turnover.

The construction and manufacturing sectors also wait the longest for payment at 107 days and 61 days on average respectively.

The news comes the week after the government announced the appointment of a small business commissioner to tackle the late payment culture by directing companies to free mediation services to settle disputes.

While late payment can cause serious cashflow problems, which inhibit growth and ultimately lead to failure, businesses are able to take advantage of unpaid invoices by securing finance against their value.

Jeff Longhurst, chief executive of the ABFA, commented: “The scale of unpaid invoices to Britain’s small businesses has become enormous, but there is no reason for it to become a barrier to investment and growth.

“Businesses need to recognise that their unpaid invoices are an asset. In many cases, they are the most valuable asset a business has, and they can be the key to unlocking critical and affordable funding.

“Invoice finance is playing a bigger role than ever in funding British and Irish businesses’ growth, and it is now an established part of the funding mix for a huge number of small businesses. But it can also help many more businesses.”

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