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Stunted growth, staff redundancies and potential business failure are the
realities facing SMEs in 2006 as a direct result of late payment, according to a
new ‘Late Payment Report’ from asset based lender Fortis Commercial Finance.
The lender surveyed SMEs to ascertain the impact of Britain’s burgeoning late
payment culture and found the problem is likely to be particularly acute over
the coming months.
SME bosses are set to bear the brunt of the issue, with more than one in three
indicating that worries over late payment are likely to lead to a significant
increase in management stress levels.
Alarmingly, a further 32% said they fear the issue could potentially lead to
reduced business growth.
But most worrying of all, 10% said they fear being forced to downsize their
business with a further 6% indicating that late payment could affect their
operations so severely that it could result in business failure.
One in ten businesses indicated they may have to make staff redundant as a
direct result of late payers.
The survey provided better news for debt management professionals, with 16% of
businesses saying they are likely to need to significantly increase the
resources of their debt management function.
Yet surprisingly, the figures show that SMEs are unlikely to turn to the
services of an invoice financier to mitigate the risks posed by late payment,
with a mere 2% indicating they would consider this option.
Tim Corbett, Managing Director for Fortis Commercial Finance, commented: “Late
payment has long been an issue for UK SME’s but these findings highlight the
true extent of the problem and the broad range of potential implications for
British businesses and their employees,” said .
“Whilst the findings point towards a challenging year ahead for UK SME’s, the
problems caused by late paying customers are far from insurmountable and
businesses can take a number of simple steps to reduce their exposure to the
issue.”
“Perhaps the simplest means of funding business growth whilst simultaneously
reducing risk is to work with an invoice financier to unlock assets in the sales
ledger.
"Invoice finance releases up to 90% of the value held in outstanding invoices
and, unlike an overdraft, offers greater flexibility since an invoice finance
facility grows automatically in line with companies’ sales growth.
“With the spectre of late payment unlikely to disappear from the British
business horizon in the foreseeable future, SME’s would be advised to consider
this innovative form of finance or face the prospect of continued worries over
unreliable debtors for many months to come.”
Source:
RedAlert
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