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How Invoice Finance Can Overcome Late Payment

February 23, 2012 | Comments: 0 | Views: 157

New sector research from Bacs Payment Schemes has found that the retail and distribution sector bore the brunt of the £33.6 billion owed to SMEs in late payment in 2011.

Despite being the promptest payers themselves according to a recent study from credit insurer Atradius, retailers were owed £16.6 billion in outstanding invoices last year to underline why the industry has struggled during the downturn.

More than two in five SMEs within the sector reported they had experienced late payment in 2011 (42%), with the average business owed a whopping £82,000 at any one time - more than double the UK average of £39,000.

Despite these astounding figures, fewer than one in three admitted to being concerned about late payment.

Somewhat unsurprisingly the manufacturing industry, which has endured a topsy-turvy time of things of late, has also struggled to avoid the late payment climate which has so engulfed the UK's business community.

More than half of UK manufacturers experienced late payment last year (55%) according to the figures, with £10.3 billion owed in outstanding sums. This translates into the average business being owed £43,000 at any one time, with two in five concerned as a result.

The data also revealed the UK services industry was widely affected, with 52% suffering from late payment. However the problem hasn't matched the depths of the aforementioned sectors, with only £14,000 owed to the average business and £5.9 billion owed to the sector as a whole.

It is clear that late payment is a widespread issue that has proven a significant factor in the rising insolvency figures - something that's only likely to intensify as more and more firms are affected.

Stringent credit management strategies are therefore essential in the current economic climate to safeguard your business against this challenge, from credit checking new and existing customers to suspending work and services where necessary.

Given the challenges in accessing traditional funding facilities such as bank overdrafts and loans in recent times, it has been difficult for SMEs in particular to compensate for this strain on their cash flow.

Yet invoice finance is available according to the latest figures from the Asset Based Finance Association, with advances to its members' clients reaching £16 billion in Q3 2011. By releasing cash against the value of a business' sales ledger just 24 hours after their issue, your business can access the funds that are vital to growth.

They also excel at overcoming late payment as factoring incorporates a dedicated sales ledger management service, with the added option of bolting on bad debt protection.

Find out more about invoice finance or get a factoring quote in three easy steps.

Source: EzineArticles
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