This is how to combat B2B late payment
New financial year, same old problem. Just a month into 2018-19 and B2B late payment is making the headlines again. The government is making the right noises but needs to practise what it preaches. So, what can SMEs do? Invoice finance is one solution.
New research from accounting software firm Xero claims that over 50% of small businesses were not paid on time in 2017 and that this delay caused a similar amount of SMEs to begin the year with negative cashflow. The impact of such financial pressure on a company’s ability to maintain forward momentum and invest in growth is clear. How can SMEs be expected to drive economic growth in such conditions?
At the same time, the Small Business Commissioner, Paul Uppal, has called on the government to issue fines to companies guilty of paying their suppliers late. That such a move has been publically demanded underlines both the seriousness of the problem and exasperation over the impact of existing measures. Let’s not forget that the government only recently introduced new legislation intended to combat late payment by naming those that do not settle invoices on time. Uppal’s call suggests that this law does not go far enough.
Indeed, the government has recently announced that it will launch tough new measures to improve conditions for small businesses, including plans to crack down on unfair payment practices and give companies more scope to report poor payment performance. This is all well and good, but there has to be a big question mark against the effectiveness of such action, especially as it seems that the public sector has its own issues as a serial late payer.
According to new research from the Federation of Small Businesses, 90% of public sector suppliers have been paid late. This is an eye-watering figure. If the government is serious about tackling B2B late payment, it would seem it needs to get its own house in order first. In the past, the organisation has claimed that late payment causes 50,000 companies to cease trading every year.
As such, it’s easy to understand why small business owners put little faith in efforts to combat late payment. There is no lack of initiatives and schemes, and even legislation, but there is little evidence to suggest that anything is working. So, what can SMEs do, besides trying to remain optimistic about government plans?
Invoice finance is one answer. Alternative finance is transforming the small business finance landscape and invoice finance is very much a driving force of this growth. Its affordability, accessibility and flexibility are proving a timely antidote to the continued caution of traditional lenders. Invoice finance alone is worth billions of pounds to the UK business sector. With regard to late payment, it is a means of ensuring that payment deadlines are met, and vital cashflow is safeguarded, without jeopardising key business relationships.
Late payment is making challenging conditions even harder for small business owners, so it’s imperative that a solution is found. However, recent developments suggest that this won’t happen anytime soon. That’s why alternative finance, and invoice finance in particular, is so important for SMEs.
To find out more about A&T Business Associates services, contact Tony on 01903 602211 or firstname.lastname@example.org.