Overdue invoices give SME’s cash flow problems

Of the many challenges facing small businesses in these tough economic times, one of the biggest is lack of cash, and one of the main causes of this is late or non-payment of invoices due them. According to data collected by the independent invoice financier Bibby Financial Services, the size of the problem has doubled over the past four years.

Bibby FS has been conducting surveys of the UK’s SMEs on a quarterly basis since 2009; about 450 businesses are included in the survey and the data is used to chart the course of SMEs since the economic crisis became manifest. One of their conclusions is that big businesses are a big contributor to the cash flow difficulties of smaller ones, partly due to their own financial struggles.

Though larger and more established businesses have at least a track record and assets to present when applying for loans and/or credit from lending institutions, start-ups have little to offer as solid collateral. If the biggest operations have trouble getting money for expenses and expansion, they tend to delay or default on payment to the small operators who supply necessary products and services.

Bibby’s sales and marketing director Andy Tait said that the firm’s research identifies the need for big businesses to support the survival and growth of small ones if the economy is to make a strong recovery. The lack of funds for investment means small businesses are unable to grow, and the latest survey indicates that the number of SMEs with available funds has shrunk from around 20% in 2009 to 2% in 2013.

Organisations like Bibby Financial Services can be very helpful to SMEs because they take a different approach than the banks do when it comes to fronting money. As explained by onrec.com, an invoice financier basically advances as much as 85% of unpaid invoices, providing the small business owner with needed cash until payment on the invoice is made.