- 10 Feb
Are Late Payments Getting Later?
Is the culture of late payments getting worse in the UK?
I read a recent piece in Business Money (09/12/19), relating to research undertaken by MarketFinance. The research is based on their analysis of 100,000 invoices which were paid between 2013 and 2019 - an interesting way of identifying changes in payment culture.
Late Payments Extending
According to the article, the typical time to receive payment, following delivery of goods or completion of services is now 45 days - a long time when you may have to pay for staff, raw materials and expenses way in advance of delivery.
However, in 2019, some 39% of invoices were paid late, albeit a slight improvement on 2018 when 43% were paid late. That is still a very significant proportion.
The more concerning trend is the amount of additional days, beyond terms taken to make these late payments. In 2019, the number of additional days almost doubled to 23 from 12, the payment term appears to be extending.
This suggests that the whilst the proportion of invoices paid late has reduced slightly, it is still significant and it is worrying to see that the amount of additional credit, beyond terms, that was taken has increased by so much.
If this issue is affecting your business there are steps that you can take to improve your situation. The first is to establish an effective credit control process. There are also other quicker solutions that might help.
The Effects And Mitigation Of Late Payments
This type of late payment can play significant pressure on the cash flow of a small business. This is why many UK SMEs turn to invoice financing as a method of bridging the credit gap between raising their invoices, and getting paid by their customers.
By using facilities such as factoring and invoice discounting, the solution to late payments, a company can receive prepayments against outstanding, unpaid invoices, and use these to improve their cash flow position.
If a company has a large sales ledger of outstanding unpaid invoices, the prepayments across all of these can significantly increase their cash position and provide a significant cash injection to the company. The added benefit with a facility such as factoring is that it includes a credit control service, which can in itself help tackle late payment culture.