96% Think Increased Use Of Invoice Finance Will Improve The UK's Late Payment Culture
Our October 2015 survey of randomly selected, existing invoice finance users, found that a 96% majority thought that increased use of invoice finance, by UK businesses, would improve the UK's late payment culture.
Late Payment Culture
Even when invoices are paid according to standard credit terms, this can often mean a wait of a month, or more, to receive payment. According to Experian, the average credit period taken by UK businesses, of all sizes, averages 60 days. Invoice finance (factoring and invoice discounting) enables businesses to receive cash against unpaid sales invoices. This cash can be used for any purpose, including quicker payment of trade creditors. These services can dramatically improve the cash flow of a business, enabling them to take less credit from their suppliers.
Government Action To Tackle Late Payments
The Government has been actively taking steps to tackle late payments within the UK. In addition to the right to charge interest on overdue debts, the Enterprise Bill, which is passing through parliament at present, includes the appointment of a Small Business Commissioner. The Commissioner will be focused on tackling late payments and their approach will include the introduction of a dispute resolution procedure for businesses that don't want to go to court. Also, plans have been announced to remove the right of large customers to ban assignment, which effectively prohibits smaller suppliers from using invoice finance. This change is expected to come into force early in 2016.
The Role Of Invoice Finance
However, the number of UK businesses currently using invoice finance is still relatively small, we estimate less than 1%. Our research suggests that this is partly due to a lack of awareness, and promotion of these services. If 96% of businesses that already use these services think that wider usage of invoice finance will help tackle the late payment issue, raising awareness of invoice finance is something that should be central to any plans to tackle the UK's late payment culture.
Source: Invoice Finance And Late Payment Survey - October 2015 (100 respondents - all existing users of invoice finance).