Small businesses are forced to wait an average of 23 days longer for payment by customers than the biggest businesses, says the Asset Based Finance Association (ABFA).
The ABFA, which represents the asset based finance industry in the UK and the Republic of Ireland, says that over the last year, businesses with turnovers of less than £1m have waited an average of 71 days to receive payment from their customers.
Businesses with turnovers of more than £500m were paid far more quickly, in an average of just 48 days.
During the credit crunch and recession, the ABFA says many small businesses saw their bigger customers make increasing use of their power over their SME suppliers to gradually lengthen payment terms.
The says ABFA this weakens the SMEs’ cash flow, making it more difficult for them to ensure they have sufficient cash to pay wages, meet tax bills, invest in new equipment or staff, and cover other major expenses.
Despite the government putting pressure on big businesses to sign up to the Prompt Payment Code, small businesses now wait a week longer for payment than they did prior to the credit crunch in 2006– 71 days compared with 64 days.
Jeff Longhurst, chief executive of the ABFA, said: “These figures highlight the relationship between some big businesses and their smaller suppliers has become even more unbalanced since the credit crunch – and efforts to address this have not had a great deal of impact.”
“It’s alarming to see how much longer SMEs are waiting to receive payment compared to just a few years ago and it’s putting some SMEs in financial difficulties.
“It’s more important than ever that these businesses are aware of the options they have to get around the roadblock of late payment, and free up the funds they need more quickly.”
ABFA members provide an average of £17.5bn of invoice finance to more than 20,000 small businesses in the UK, up 9% in a year and 29% since the peak of the recession in 2009/10. currently use invoice finance.