SMEs rely on invoice discounting to cope with large companies

16/08/2008

Research from the Federation of Small Businesses (FSB) shows that small businesses are becoming increasingly reliant on factoring and invoice discounting services to copy with the cashflow pressure caused by larger companies not paying promptly.

The FSB's evidence shows that some big companies making smaller firms wait over 100 days before getting paid, often changing terms and conditions with little notice. Some firms are even charging "settlement fees" to small business suppliers.

It is no surprise, therefore, that SMEs are turning to factoring and invoice discounting to receive the bulk of their invoice payments promptly.

There is existing legislation which allows businesses to charge interest on late payments, but many SMEs shy away from applying interest to overdue invoices in case they lose their contracts with larger firms.

John Wright, FSB National Chairman said, "big companies appear to be aware that small businesses are afraid of taking them on over payment terms and are abusing their power as a result. Making small businesses wait 105 days for payment and charging them for the privilege of doing so is nothing short of outrageous."