Small and medium manufacturers are having to wait nearly double the time for invoices to be paid compared to their larger competitors according to the Asset Based Finance Association (ABFA).
During 2015 smaller manufacturers were waiting up to an average of 67 days until their invoices were paid, however, those with a turnover with over £500m had to wait for an average of 38 days. The ABFA have reported that the difference in waiting has increased over the past 12 months. SME manufacturers who are awaiting a payment has stayed at an average of just over two months
(67 days) this compares to the larger manufacturers who’s average delay fell by 9% (a 42-day decrease to 2015).
The ABFA has proposed that the late and poor payments are becoming ‘ingrained’ within the business practise which is an endemic on all sectors. They have explained that in larger businesses it is well known that they look to interrupt the payment terms and conditions within contracts with SME suppliers.
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Chief Executive of the ABFA, Jeff Longhurst has commented;
“Unfortunately, for many SMEs in the manufacturing industry, waiting more than two months to be paid is now a normal state of affairs.
“During the recession, some businesses looked to increase their payment terms in order to give themselves breathing space in the tough economic climate. Unfortunately, in many sectors, there’s been a cultural shift and delaying payment to suppliers is now common practice. Larger businesses need to treat their smaller suppliers more fairly.
“Late and extended payment times are deep-rooted issues in the manufacturing industry. This doesn’t just impact on the business in question; they need to pay their own suppliers and so there is a cumulative negative effect down the supply chain.
“Late payment of invoices and other poor payment practices have a significant impact on the UKs competitiveness and ability to attract further investment to the sector.”
Head of Businesscomparison.com, Philip Brennan has also commented;
“Cashflow is often highlighted as one of the main reasons why businesses fail. Companies need to be stronger when dealing with their late payments and the government also needs to help push regulation to make sure that businesses cannot take advantage of their buying power.
“Long payment terms are reducing competition as not all firms can compete if the payment terms are too long. Delayed payments also means that businesses are reliant on credit to keep their businesses afloat. Using credit because of payment delays reduces their margin so it is very important to get the best deal for your business if you have to take a credit facility.”
If late payments are causing your business to suffer then don’t let them, quickly compare online to find the best invoice finance quotes around.