The issue of supply chain finance came to prominence during the recession as large corporations started to realise that the collapse of key suppliers was a real possibility and could seriously disrupt their business.
Since then, of course, business has picked up and the issue has slipped back down the agenda. But a new study for Tungsten Corporation highlights the fact that nearly a quarter of all small and medium sized businesses in the UK are facing a potential crisis because of late payment of invoices.
The study, by Red Dot Research, found that the average SME is owed £40,857 in unpaid invoices, with £20,937 of that total overdue. Tungsten calculates that when applied across the UK’s 5.2 million SMEs, the total owed could be as much as £212 billion.
Of the 1,000 companies surveyed, 23 per cent said that late payments had put them at risk of closure.
It’s probably no surprise that 22 per cent of those surveyed said most of their late payments were from large businesses. But 11 per cent pointed to medium-sized firms, and eight per cent picked out the public sector as being responsible for late payments (despite the government’s own prompt payment code).
Tungsten specialises in invoice financing and e-invoicing, and CEO Richard Hurwitz points out that, while advances in technology mean that many payments can now be processed electronically, “e-invoicing was only used by a quarter of the small businesses we spoke to”.
Of course, it is up to individual companies to manage their debtors effectively – and technology may well help.
However, it is clear that although the solvency of suppliers has declined as concern, it is more of a risk that might have been thought. Maybe it is time to look again at strategies for supply chain finance.