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How small firms can beat late payment blues in 2023

The year maybe new but the problems remain the same for small firms – late payment is back making headlines, with bleaks news for thousands of businesses prompting fresh calls for action. So, how can firms beat the late payment blues in 2023?

This time it is the Small Business Minister underlining the need for a solution to the long-standing problem. The move comes on the back grim news from the Federation of Small Businesses on the impact of late payment and a concerning deceleration in business activity.

According to the Federation, around 50,000 businesses close every year because of late payment issues, with data published at the end of 2022 showing that the practice was on the rise, with over half of small businesses affected by overdue invoice payment during the third quarter of the year.

At the same time, new research shows that business activity shrunk at its fastest rate in December, with the contraction fuelled by the high cost of living, which has affected household spending levels and business investment capacity. The prospect of a significant recession looms ever larger.

The renewed calls for action on late payment are a positive, but the move is unlikely to stir much optimism in the small business sector. Government rhetoric around the subject is regular, while meaningful action is rare. Furthermore, it won’t be lost of small business owners that while the government has pushed for a more effective Prompt Payment Code, very few large companies has been penalised using it.

Managing late payment and how invoice finance can help

Against a backdrop a downturn in business activity, gloomy economic forecasts and little in the way of effective government-level assistance, how can small business manage the impact of the late payment in 2023?

Invoice finance can help.

In the wake of prolonged caution from traditional lenders, which is an issue that has returned during the pandemic and amid challenging market conditions, services such as invoice finance and other alternative finance facilities are proving a vital source of capital for small businesses, both for maintaining cashflow and for facilitating investment.

These facilities, which offer a more easily accessible and personalised approach to lending, are helping small businesses survive and target recovery, stability and growth. In particular, invoice finance is allowing firms to secure capital without putting key business relationships at risk. As much as 90% of an approved invoice can be advanced by a finance provider, with the remainder settled by the client.

Overdue-invoice pressure and small firm finance options

The decision by the Small Business Minister to highlight the issue of late payment is a welcome step, but small firms aren’t likely to put much stock in his pleas given the government’s track record in the area. Regardless of ministerial activity, or inactivity, businesses have to protect themselves amid highly challenging market conditions and invoice finance is one way that they can do this.

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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