Alistair Darling pledges to pay invoices within 5 days

01/04/2010

In a move that will be welcomed by small and medium sized businesses nationwide, the Chancellor Alistair Darling says the Treasury will pay 80 per cent of invoices from small businesses within five days.

According to a recent study involving 300 business owners, 35 per cent are finding that customers are taking longer to pay their bills than a year ago. The problem is worse in some sectors. For example, 47 per cent of manufacturing and construction firms claim that customers are delaying payment more than a year ago, along with 36 per cent of business services bosses.

Worryingly, Bacs says small and medium sized enterprises are currently owed £30.4 billion in unpaid invoices and over a billion each year is wasted on chasing these late payers.

Instead of spending time, money and effort chasing those avoiding payment, many small firms turn to invoice factoring as a more efficient option. 'Selling' an invoice to a factoring firm means businesses get the money owed straight away, minus a small amount to cover the factoring firm’s payment retrieval efforts.

Now, at least, small firms may be able to bank on the government paying them on time.