According to a recent study by Siemens Financial Services, SMEs are an integral part of the UK economy, accounting for 47% of all private sector turnover.
They bear the brunt of late payments and long payment terms. Businesses (with turnover of under £1m) wait for 72 days for payment. Businesses with an annual turnover of £1m-£10m wait on average 53-54 days, and the largest businesses wait on average 48 days. A typical SME spends 130 hours a year chasing outstanding invoices. The cost associated with this time taken is £10.8 billion per year. Unpaid invoices account for 14% of SMEs’ annual turnover.
These costs combined mean that SMEs are missing out on over £250bn of cash flow. Outstanding bills are viewed as a drain on cash flow, yet finance products such as invoice finance can be used to unlock funding. Invoice finance is increasingly being seen by SMEs as a flexible and reliable tool to unlock working capital and now provides more funding than ever before to SMEs with funds used across the UK recently exceeding £20bn for the first time.
This further emphasizes the increasing need to protect SMEs’ receivables against non-payments by clients by using either credit insurance or non-recourse invoice funding solutions.