How The Culture Of Slow Payments Can Damage SMEs

Slow payment culture in the UK is not changing any time soon and cash flow issues is causing major problems for SMEs.

Most small businesses struggle with cash flow as they fund themselves from their operations, which often leaves very little in reserve.

Depending on the industry, it may be common to wait 100 days or more for payment for goods or services. And if your company is incurring the costs of a sale–such as labour, supplies, or overheads more than 100 days before it receives any revenue, you should be prepared to cover any potential cash shortfall. 

The effects of late payments are multiple, ranging from damage to the supply chain and business reputation to impacting credit ratings and consequently the ability to access further funding.

The best industries for cash flow are ones where you can set up recurring revenue. This includes service industries like insurance where billing for policies sets up recurring revenue.

However, there are businesses that struggle with cash flow including:

  • Seasonal businesses where they have to balance peaks with valleys and struggle with how inconsistent cash flow is
  • Construction businesses that often have to invest a lot of their own money into a job before being paid
  • Manufacturers – where cash outflows before it inflows

Negative cash flow can be a struggle for any SME, which is why cash flow forecasting and invoice finance providers such as Populous World come in. Business owners need to ensure that they are mindful of their customers’ payment practices so that they are not at a disadvantage. If your accounts receivable days are increasing year-over-year, that may be a warning sign. And the longer the payment cycle, the higher the risk that the company may experience cash flow issues.

Invoice finance could be the answer

Long accounts receivable days are why more and more businesses are turning to invoice finance to help meet their cash flow, funding and growth plans. Fundamentally, invoice finance is a way of accessing funds tied up in your outstanding invoices as soon as they are raised, rather than waiting weeks or months to be paid.

An upside of this approach is that your chances to obtain credit increases in proportion to how much business you are doing.

Put an end to cash flow concerns…

The most immediate way invoice finance can benefit your firm is by removing worries over when customers are going to pay their invoices.

Anyone who has suffered from the uncertainty that comes from clients who do not settle their accounts in a timely manner knows how frustrating and potentially damaging inconsistent cash flow can be.

Ultimately, any business can fail. But monitoring your cash flow can be a definitive means of preventing business insolvency. With innovative platforms like Populous World, you can turn cash flow shortfalls into a thing of the past.

>> Is your business in need of fast, short-term financing? Do you need to access cash faster than your customers pay you?

Populous World is an Invoice Finance provider that unlocks working capital for UK businesses.

Bridging your business’s cash flow gap is something that Populous World excels in delivering, providing you with the funding tools to grow and sustain your business.

For more information, visit us or contact a member of our funding team: [email protected]

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