SMEs struggle to obtain payment of invoices, says research

17/09/2009

A new study has revealed that small businesses are losing as much as £2 billion a year as a result of clients failing to pay invoices on time, or at all.

Some 34 per cent of companies use the excuse that their accountant is unavailable or that the person who can sign the checks is away for a period. This is the most popular excuse for delay in invoice payment, while 33 per cent offer the excuse that they have already dispatched the check, but that the postal system is having problems.

Despite the more common use of BACS and CHAPS to make payments, some 14 per cent of customers continue to make excuses, blaming the bank for offering inadequate services, instead of admitting they have not yet made a payment.

The problem of unpaid invoices is increasing as a result of the recession, with more and more clients looking to delay paying bills until their cash flow improves. However this is an evil circle, as the firms waiting for the payment then suffer.

A solution is invoice factoring, which, for a percentage of the invoice value, removes the time-consuming responsibility of chasing invoice payments from small firms. Instead, an invoice factoring firm will pay the money up front and work to recover the debt themselves.