A recent survey found that on average, businesses are waiting 74 days for invoices to be paid, said a November 2017 BridgingAndCommercial.co.uk article.
This is one of the main reasons why businesses suffer from low cash flow, and the Federation of Small Businesses claims that up to a third of payments to businesses are late.
According to studies, just one business sector, employment agencies, pay their invoices within 30 days. The worst payers were membership organisations, which took an average of 137 days to pay their invoices.
Most businesses rely on a healthy cash flow to keep financially healthy. Small businesses, in particular, can have serious difficulties if large amounts are owing on unpaid invoices. There are short-term solutions to low cash flow; invoice factor firms can purchase the invoice debts, or a bridging loan can be used to raise capital then repaid once invoices have been paid.
Some companies offer discounts for early repayments. Others do not offer credit facilities until a business has been trading with them for some time.
Sandra Cotton from Aviva advised:
“If you don’t agree payment terms until after you’ve supplied, you’re on to a loser. Often the person who instructed you in the first place is not the person who will pay your invoice. Have a go-to person and know what area of the organisation you need to speak to should the process fail.”
Governments in the past have looked at the issue, but have not come up with effective solutions to speed up payments.