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Cashbook Finance - Blog
Cashbook Finance - Blog

There have been many initiatives, countless promises and even legislative reform, but small businesses are still suffering because of late payment. How can these firms combat it? Alternative finance can offer protection against the practice.

According to the latest Independent Chartered Accountants of England and Wales Business Confidence Monitor (ICAEW), nearly a quarter of SMEs say that late payment is a bigger problem than it was 12 months ago. Furthermore, the property, business services, manufacturing and engineering, construction, retail and wholesale, and banking industries are all reporting that the incidence of late payment is growing.

This news comes despite notable efforts to tackle the problem, including the naming and shaming of perpetual offenders, which comes in the wake of important changes to related legislation, and the threat of public-sector-contract shutout for large businesses that do not pay smaller firms 95% of their invoices in 60 days.

Whether the picture will look different next year – by which time recent measures will have had more time to have an impact – remains to be seen. There has been a clear intensification in the fight against the practice and this stronger approach should eventually provide some relief.

Nevertheless, as the ICAEW figures suggest, the situation is clearly critical right now. According to the Federation of Small Businesses, the practice costs the business sector billions of pounds and forces thousands of firms to close every year. Clearly, SMEs are still in desperate need of protection against late payment. Alternative finance can help.

In the wake of prolonged caution from traditional lenders, a position that Brexit is helping to entrench, alternative finance is providing small businesses with access to capital for vital investment. The most widely used alternative finance facility is invoice finance, which can offer some protection against late payment.

This easily accessible, affordable and flexible service allows firms to secure capital and safeguard cashflow, without jeopardizing key business relationships. As much as 90% of an approved invoice can be advanced by a finance provider, with the remainder settled by the customer.

The latest attempts to combat late payment may well bear fruit, but SMEs cannot afford to take a wait-and-see attitude to these efforts. Invoice finance offers a tangible means of protection and this why these companies should include the facility in their financial planning.


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