SME food manufacturers forced to wait nearly eight weeks for payment
SME food manufacturers now face waits of 55 days (or nearly eight weeks) for their invoices to be paid, two-thirds longer than the 33 days (or nearly five weeks) their larger competitors wait, says the Asset Based Finance Association, the body representing the asset based finance industry in the UK and the Republic of Ireland.
The ABFA says that payment delays for the UK’s small and medium food manufacturers (companies with an annual turnover under £25m) have increased another 4% in the past year, the second year in succession that delays have increased.
It points out that while payment delays have worsened for SMEs, they have improved for the largest food manufacturers (those companies with an annual turnover of over £500m). In the past year, payment delays for the largest companies has improved by 6% falling to 33 days, from 35 days in the previous year.
The ABFA says that without the bargaining power that their larger rivals hold, SME food manufacturers continue to face pressure as a result of supermarket price wars.
The ABFA says that the current situation for SME food manufacturers could be worsened further by Brexit as the fall in the value of sterling raises their import costs.
The ABFA explains that the increase in payment delays comes despite government efforts to improve payment practices. The Enterprise Bill passed last year established a Small Business Commissioner, designed to assist SMEs in disputes with larger businesses and refer them to mediation.
In addition, the Groceries Code Adjudicator was established in 2013 and covers the 10 largest UK supermarkets and seeks to control practices with a negative impact on suppliers.
Jeff Longhurst, chief of the ABFA, said:
“Payment delays remain a very real problem for SME food producers, despite government efforts to counter the issue.
“Larger competitors are often more willing or able to place pressure on suppliers to abide by payment terms, whilst the value which many SMEs place on repeat business holds them back from doing so.
“Payment delays can present a real threat to these businesses- they place pressure on cashflow and can end up significantly restricting their capacity to expand order books. Even when a business is thriving, it can take just a few unpaid invoices to create a major problem.
“There are, however, some steps business can take to protect cashflow. Asset-based or invoice financing, for instance, enables firms to borrow against the value of their invoices before payment is received, or assets, freeing up funds to mitigate late payment. Careful financial planning can be key.”
