UK SMEs owed £67bn in unpaid invoices
– But small businesses can unlock much of that funding through competitively priced finance.
– Manufacturing, construction SMEs among sectors owed the most in unpaid invoices.
British SMEs* are owed £67.4bn in unpaid invoices, up 8% from £62.5bn in the last year alone, and 36% from £49.5bn in 2011 as the extent of overdue payments and extended payment times grows, shows research by the Asset Based Finance Association (ABFA), the body representing the asset based finance industry in the UK and the Republic of Ireland.
Previous research from the ABFA recently showed that SMEs are now waiting an average of 72 days for payment of invoices, up from 61 days at the height of the recession in 2009.
However, the ABFA says businesses should view these unpaid invoices not as an unavoidable drag on their cashflow but as one of their most valuable assets which they can use to unlock funding.
The ABFA notes that, whilst the recovery is taking hold, businesses are not accessing the finance that could allow them to invest and grow. It explains that its members, which range from high street banks to independent specialists, provide tens of thousands of British businesses with finance secured against the value of their invoices.
Members of the ABFA currently provide £9bn in finance to SMEs against the value of their invoices, and at any one time will be providing £19.3bn overall in asset based finance to businesses.
Jeff Longhurst, chief executive of the ABFA, said: “The scale of unpaid invoices to Britain’s SMEs has become enormous, but there is no reason for it to become a barrier to investment and growth.
“Businesses need to recognise that their unpaid invoices are an asset. In many cases, they are the most valuable asset an SME has, and they can be the key to unlocking critical and affordable funding.
“Invoice finance is playing a bigger role than ever in funding British and Irish businesses’ growth, and it is now an established part of the funding mix for a huge number of SMEs. But it can also help many more businesses.”
The ABFA explains that even this £67.4bn figure in unpaid invoices is likely to be a conservative estimate of the true value of unpaid invoices, as it only reflects the invoices of 180,000 SMEs that report detailed accounts. The true total value is likely to be significantly larger.
SMEs’ unpaid invoices grow by over a third since 2011
Manufacturing, construction among sectors with most unpaid invoices owed to SMEs
The ABFA says that manufacturing and construction are among the sectors where SMEs have the highest value of unpaid invoices.
It says that outstanding invoices from SMEs in the construction sector currently stand at £7bn, amounting to 16% of annual turnover in the sector.
Small and medium-sized manufacturing businesses are owed £13.4bn by their customers, which represents 17% of their annual turnover. Across SMEs as a whole, unpaid invoices amount to 14% of annual turnover.
Separate research by the ABFA recently showed that construction businesses wait an average of 107 days for payment of invoices, while manufacturers must wait 61 days on average.
* Private non-financial businesses with a turnover of £25m or under. Source: Analysis of Companies House data by the ABFA
