A recent survey of small business showed 60 per cent of respondents claimed that their firm's growth is restricted by it. Happily for small businesses, outsourcing debt collection and employing the services of an invoice finance company is, at last, no longer seen as the "finance of last resort" that it once was.
As we at Simply Business have been crowing for ages now, Invoice Finance is now rightly being seen as a progressive and value for money means of business growth finance.
The journey of invoice finance from an "avoid-at-all-costs service" to an effective solution to the cash flow headaches has undoubtedly been spurred on by the fact that the problem of late payment is clearly here to stay, despite the introduction of legislation.
Four years ago, the government introduced laws requiring companies to pay their suppliers within 30 days, in an attempt to relieve the pressure on small businesses.
However, the importance of contracts to small firms ultimately means they are reluctant to apply the rules, even though failure to pay within the specified timescale will attract a penalty of 9.25% a year. A recent survey of members of the Forum of Private Business (FPB) revealed that many business owners were afraid to inflict interest charges on late payers because they didn't want to damage customer relations and risk losing future business.
Unfortunately, such selfless sentiments won't force your customers to cough up and persistent late payers need to be confronted head on if you want any chance of maintaining a steady cash flow.
The FPB recently reported on another large firm, the fashion retailer New Look, who is causing problems for its suppliers by extending its payment terms to 75 days, reportedly in order to increase "investment in new space".
Nick Goulding, chief executive of the FPB, commented: "This issue continues to have devastating effects on our members as large retailers abuse their buying power. It beggars belief that New Look has the gall to suggest that its expansion plans should be paid for by its suppliers."
An invoice finance provider advances the majority of the value of your invoices immediately, so that you don't have to wait for your customers to settle their bills before using the money. In addition a factoring service takes on responsibility for managing your "accounts payable" process, meaning you are not having to have potentially negative conversations around payment, whilst also possibly trying to land a new piece of business.