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How small businesses can manage the impact of late payment

Late payment is continuing to put the brakes on small businesses growth. How can owners manage the impact on cashflow and investment? Alternative finance offers one solution that can help protect them and their businesses.

According to new research from digital banking platform Tide, small- and medium-sized businesses are currently chasing a staggering £50 billion in late payments. The study also found that businesses are spending an hour and a half every day pursuing overdue payments, which is equal to around an incredible 900,000 hours on a nationwide scale.

The results of a new MarketFinance survey paint a similar picture, with late payment delays continuing to increase (from 12 days in 2018 to 23 days in 2019) along with the value of the invoices that are being paid late. The Federation of Small Businesses has long highlighted the damage done by the practice, claiming it forces thousands of firms to the wall every year.

And the damage isn’t just financial. According to a study carried out by BESA and the Electrical Contractors’ Association, late payment is causing stress and other mental health problems among 90% of small business owners.

These figures suggest that despite the various efforts to combat late payment, the practice persists. Notably, the decision to include Balfour Beatty on a state contractors list in Q4 2019, even though the company had been suspended from the Prompt Payment Code for persistent late payment, casts fresh doubt over the government’s commitment to finding a lasting solution.

So, what can small businesses owners do?

Invoice finance is one tool that they can use to help manage the pressures of late payment.

In the wake of prolonged caution from traditional lenders, a position that the stalled Brexit process has helped 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 protection against late payment.

This easily accessible, affordable and flexible service allows firms to secure capital and safeguard cashflow without jeopardising 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 fight against late payment needs fresh momentum and it remains to be seen if the subject gets the attention it needs amid Brexit preparations. Regardless of what happens, it is important that businesses do everything they can to protect themselves. This is where invoice finance comes in.

To find out more about A&T Business Associates services, contact Steve Bowles on 01903 602211 or steve.bowles@atbusinessassociates.co.uk.

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