Business services companies worst affected by late payments

Small and medium businesses operating in the business services sector are being forced to spend an incredible 263,670 hours chasing overdue invoices every week to maintain their cash flow ñ valuable time which could be better spent winning new clients and growing their businesses.

The independent research, commissioned by one of the UKís leading corporate funding specialists GMAC Commercial Finance (GMAC CF), shows that every business in the sector spends an average of five hours chasing unpaid invoices each week. This is the highest of all UK business sectors and compares to just 20 minutes in the property sector and a national average of nearly three (2.93) hours every week.

The Department of Trade and Industry (DTI) estimates that there are nearly four million SMEs in the UK[1] which equates to a startling 11.5 million hours[2] spent chasing unpaid invoices every week nationwide.

Late payment reduces cashflow which is vital for financial health and can make or break a business. According to the Governmentís Small Business Service, SMEs are owed a staggering 17 billion from debtors at any one time, and approximately 10,000 UK businesses fail each year as a direct result of late payment.[3]

The UKís late payment culture appears to be entrenched. The Factors and Discounters Association (FDA) estimates that the average number of debtor days (time waiting for payment) reached 60 in 2004, up from 57 the previous year[4], reinforcing GMAC CFís research findings.

In a bid to beat the debtors, improve cash flow and free up valuable time, small business owners are increasingly discovering invoice finance, which can give them immediate access to capital by raising finance against the value of their sales. With the ability to increase available finance in line with sales, invoice finance is flexible and can be more cost-effective than bank loans or overdrafts.

Nick Grainger, area manager for GMAC CF invoice finance said:ìThese shocking statistics underline the difficulties that SMEs in the business services sector face on a daily basis. Many small businesses operate on tight margins and are under constant pressure to maintain cash flow, yet their ability to do so is severely hampered by habitual late payment.

ìAs a result, small business owners are being forced to devote a huge amount of their time to recovering debts, which ultimately limits their growth and expansion capabilities, and even their chances of survival.

ìHowever, there is an alternative to expensive bank overdrafts,î continued Nick. ìInvoice finance can generate immediate capital on outstanding invoices, reducing cash flow worries and allowing business owners to concentrate on what really matters ñ running their businesses.î

With more than 40 yearsí experience GMAC Commercial Finance is today one of the UKís leading providers of invoice finance, whose services for business customers include the collection of outstanding invoices and access to a dedicated litigation team to help secure overdue payments.