A recent report issued by the Asset Based Finance Association (ABFA) revealed that small businesses in the UK have to wait far longer for their invoices to be paid than larger firms do.

On average, they wait 23 days extra for payment than bigger companies. Firms with a turnover of less than £1m waited 71 days on average before they received payment. This is a full week longer when compared to figures from 2006.

Companies that had a turnover of £500m are now paid the fastest. They only had to wait 48 days on average to be paid.

This is part of a growing trend, with many of the large multinationals negotiating longer payment terms with their suppliers. The majority of those suppliers are small and medium-sized enterprises (SMEs).

In 2008, the government introduced The Prompt Payment Code, with nearly 1,700 UK firms having signed up.

However, the code only asks organisations to pay their suppliers according to their contract and not to delay payment beyond that point. It does not stop firms from negotiating longer payment terms at the end of the contract period. In addition, the code is not legally binding.

More and more SMEs have little choice but to wait longer for payment, even if that causes them cash flow issues. For many SMEs, asset finance is bridging the gap by allowing them to secure short-term loans. This allows them to buy the stock that they need to fulfil the next order. Many are using firms like DJB, who are independent and use a range of different funders to provide businesses with capital.

Witten by Mike on