UK manufacturing businesses endure the longest waits out of any industry sector to get paid, according to a new survey by trade credit insurer Atradius.
However, cashflow problems related to late payments can be eased by invoice finance facilities such as factoring and invoice discounting, which work to release cash tied up in unpaid invoices quickly and simply.
'Cashflow issues could impact stability'
During Q1 of 2012, manufacturers endure a wait of 32.4 days to be paid, whilst those in the financial sector had the shortest wait on average at 19.3 days.
However many manufacturers are happy to offer long payment terms, especially to B2B customers to help establish long-term trade relationships.
Alun Sweeney, director of Atradius UK and Ireland, said of the findings: “The worry is that although these techniques may sustain business in the short term, cashflow issues could well impact their stability in the long run.”
Manufacturers were also most likely to incentivise customers to settle invoices promptly, but such tools can prove problematic as non-payments may not be compensated.
Alan felt manufacturers should approach such methods with caution: “Tools like early payment discounts are used as easily-achievable ways of increasing timely payments and recouping costs, but they are not risk-free and can easily lead businesses into financial difficulties.”
“With customers’ own cashflows being squeezed, along with challenging trading conditions, these tools aren’t able to safely guarantee payments or compensation in the event of payment defaults”, he concluded.
Invoice finance can remove cashflow gaps
If your owner-managed business is looking for a specific funding solution tailored to your requirements, have you considered invoice finance? If you're not sure about how invoice finance works, why not browse our website to find out more about how our facilities work, including invoice factoring and invoice discounting, or contact our team of experts today for friendly advice!