Late payment causing businesses cashflow problems – and expected to get worse
– Late payment is the main cause of cashflow problems faced by UK businesses
– One in five businesses admit facing cashflow problems
– Almost one in three businesses expect more customers to require deferred payment terms over the next six months
The problem of late or slow payments continues to cause cashflow difficulties for businesses, and almost a third expect it will only get worse in the next six months, according to the latest in the Business in Britain series of reports from Lloyds Bank.
While the fact that overall business confidence remains strong (at 43%) may lead many businesses to consider investing in growth, those plans may be hampered by the fact that almost one in five (18%) businesses admit to experiencing cashflow problems.
Late payment is cited by nearly three in five (59%) of those businesses as being a major cause.
The twice-yearly report, which is now in its 23rd year, canvasses the opinions of 1,500 UK companies, predominantly small and medium-sized businesses, and shows that 31% expect the proportion of customers requiring deferred payment terms to increase in the next six months, up from 27% six months ago.
Just 7% of businesses expect that proportion to fall during the second half of 2015.
Donald Kerr, managing director at Lloyds Bank Global Transaction Banking, which provides alternative sources of financing for customers including asset based lending and trade finance, said: “While the number of businesses suffering cashflow problems has fallen from a peak of 35% in 2013, it remains stubbornly high.
“Cashflow is the lifeblood of any business but for too many businesses, late payments continue to be a significant problem. Where businesses do expect cashflow to be an issue, they need to take action to manage issues like late payment so that it doesn’t hamper their opportunities to grow.
“Specialist types of lending such as invoice finance can alleviate these pressures by allowing businesses to borrow against the value of their invoices helping them to avoid payment delays and improve cashflow.
“Thorough credit checks on customers and setting out clear payment terms at the outset of any relationship will also help.”
Businesses in Gloucestershire and Oxfordshire are most likely to suffer cashflow problems (23%) while those in the South West of England (8%) are least likely.
After late payment, other major causes of cashflow difficulties include fall in demand for products and services, as cited by 37%, and default by customers (31%).