UK SMEs owed more than £586 billion in outstanding invoices


The average small business is owed more than £108,000 in unpaid invoices, an increase of 8 per cent since the last Business in Britain report in January 2016, with almost a third of firms citing late payments as the biggest cause of cashflow problems.

The new research, which gathers the views of more than 1,500 UK companies,  found that more than 1.5million SMEs are currently owed more than £200,000 in outstanding invoices, up from 1.3million  in January.

The issue of late payments is likely to persist into 2017, with nearly a third of businesses expecting more customers to require deferred payment terms in the next six months.

Assets and investment

Meanwhile, British small businesses’ own a combined total of £2.6tn of assets outright, an average of almost £490,000 each. This is an increase of £18,000 per business since the start of the year.

Businesses said they were expecting to invest an average of £1.5m into their business over the next six months, up marginally from January, suggesting they remain undeterred by recent political and economic shocks.

Awareness of finance

However, these investment plans could be being held back by relatively poor awareness of different forms of financial support available.

Only two in five of firms surveyed for the report said they aware of invoice finance, and only a third of SMEs were aware of asset-based lending.

Adrian Walker, managing director, head of Global Transaction Banking at Lloyds Bank, said: “If businesses are issuing more invoices and investing in more assets, then this is very positive for them and the economy.

“But if companies are having to wait longer to be paid, and are reporting that they expect to face an even longer wait in the future, this slowing of payments could be holding businesses back from releasing critical cash to drive future growth.

“The amount of money that firms have tied up in unpaid bills and other assets is significant, and this report suggests that these sums could be unlocked if businesses were more aware of the funding options that are open to them.”

Finance solutions

Invoice finance allows businesses to access the money they are owed in unpaid client bills very quickly, often within 24 hours, freeing up cash that can then be used to help catalyse growth and to help invest into capital expenditure.

Asset-based lending, meanwhile, can help protect working capital by unlocking the value tied up in stock, plant machinery or property to give access to working capital that can help finance business growth.

Designed for businesses with a turnover of more than £1million, it works alongside invoice financing to provide a cost-effective, scalable and flexible way of increasing working capital, supporting business growth.

Asset finance could also help businesses to invest in critical business assets without draining their working capital. Through hire purchase or leasing, firms can purchase machinery, vehicles and other equipment and avoid paying for them outright. Paying for the asset with regular payments over an agreed period, easing cash flow and enabling that money to be used to support other business needs.

Regional variations

The report highlights significant differences in outstanding invoices across the UK.  Businesses on the south coast (Kent, Sussex, Surrey, Hampshire and Dorset) were owed the least on average in outstanding invoices, valuing at £80,000 each. In January, the same areas were owed the most, with outstanding invoices worth an average £109,000 per business.

They also owned the least in assets, with each business owning less than £420,000 in assets outright.

Businesses in Wales, however, were owed almost twice as much, with the average Welsh SME owed £150,000 in outstanding invoices. Two in five of Welsh businesses were also reported to be owed more than £200,000 in unpaid invoices.

Welsh businesses’ assets were also the most valuable in the country, owning on average £682,000 in assets outright.

Walker added: “Small and medium-sized businesses are the lifeblood of the British economy but we continue to see too many of them whose growth is being held back due to a lack of awareness of the multitude of funding options available to them.

“There is a huge opportunity for them to accelerate their prosperity if they speak to a trusted adviser or bank manager to learn more about how they can unlock cash in their business, which will allow their business to grow and invest in growth for the future.”