British SMEs are now owed £67.4bn in unpaid invoices, a rise of eight per cent from £62.5bn in the last year alone, according to a new study.
The Asset Based Finance Association (ABFA), the invoice finance trade body that published the study, said the total marks a 36 per cent increase from £49.5bn owed in 2011.
The research shows the full extent of overdue payments and extended payment times now hitting SMEs – a growing problem.
Previous research from the ABFA showed that SMEs are now waiting an average of 72 days for payment of invoices, up from 61 days at the height of the recession in 2009.
However, the ABFA says businesses should view these unpaid invoices not as an unavoidable drag on their cash flow but as one of their most valuable assets which they can use to unlock funding.
The ABFA notes that, whilst the recovery is taking hold, businesses are not accessing the finance that could allow them to invest and grow.
Jeff Longhurst, chief executive of the ABFA, says: “The scale of unpaid invoices to Britain’s SMEs has become enormous, but there is no reason for it to become a barrier to investment and growth.
“Businesses need to recognise that their unpaid invoices are an asset. In many cases, they are the most valuable asset an SME has, and they can be the key to unlocking critical and affordable funding.”
ABFA members currently provide £9bn in finance to SMEs against the value of their invoices, and at any one time will be providing £19.3bn overall in asset based finance to businesses.
Longhurst added: “Invoice finance is playing a bigger role than ever in funding British and Irish businesses’ growth, and it is now an established part of the funding mix for a huge number of SMEs. But it can also help many more businesses.”
He explained that even this £67.4bn figure in unpaid invoices is likely to be a conservative estimate of the true value of unpaid invoices, as it only reflects the invoices of 180,000 SMEs that report detailed accounts. The true total value is likely to be higher.
It says that outstanding invoices from SMEs in the construction sector currently stand at £7bn, amounting to 16 per cent of annual turnover in the sector.
Small and medium-sized manufacturing businesses are owed £13.4bn by their customers, which represents 17 per cent of their annual turnover. Across SMEs as a whole, unpaid invoices amount to 14 per cent of annual turnover.
Separate research by the ABFA recently showed that construction businesses wait an average of 107 days for payment.
By Marcel LeGouais