East Midlands businesses could be losing as much as £84
million* a year chasing customer late payment, according to new
research by Bibby Financial Services.
The nationwide survey of business owners and managers has
revealed that firms in the East Midlands spend a total of 738,000
days a year chasing customers for payments which equates to an
annual cost of £779 per firm.**
The report also shows that over a third (34 per cent) of
businesses in the region have been chasing much harder for payment
over the last year - a worrying statistic considering the UK
economy has returned to growth.
Unfortunately, the situation could be about to get a lot worse
for firms in the East Midlands if the Coalition Government repeals
Darling's 2010 Budget pledge and increases the Government's payment
terms on invoices from five days, as announced in March 2010 to
assist the cash flow of small businesses, to 30 days to save the
Government millions of pounds.
If this goes ahead it could rub more salt in the wounds of small
businesses in the East Midlands which supply the Government with
products and services. Owners and managers will no longer be able
to rely on timely payment from the Government and this, coupled
with chasing for late payment from other customers, could bring
cash flow to an abrupt halt.
David Webb, Bibby Financial Services spokesperson for the East
Midlands says: "Firms cannot keep stalling payment and expect it to
have no consequence because a delay in collecting in outstanding
monies will have an effect on any business regardless of its size.
Our research demonstrates that late payment continues to be one of
the biggest challenges faced by the region's small and medium-sized
businesses, and this challenge will become harder if the
Government's payment terms are extended to 30 days.
"However, there are some solutions to help deal with the late
payment issue and free up cash flow. Companies must ensure they are
in control of their finances and then look at all the cash flow
options available. If they cannot afford to employ an internal or
external credit control function then they could consider
factoring, which not only frees up cash flow but takes away the
burden of chasing late payment and allows owners and managers to
focus on other important core aspects of managing and growing their
businesses.
"It is evident that small and medium-sized businesses in the
East Midlands need support in driving recovery in the region and we
must provide them with the resources that enable them to achieve
this goal. Bibby Financial Services is intent on helping small and
medium-sized businesses, providing a flexible funding solution
which alleviates cash flow worries with a reliable source of
finance linked to sales invoices, allowing firms to sustain and
grow their business."
*£84 million = £84,870,000
** Calculation based on an average credit controller day rate of
£115