UK companies owe suppliers as much as £18bn at any one time exasperating the cashflow problems of small businesses, new research suggests.
Cash flow, particularly in high-cost operations such as manufacturing, is often the main cause of business failure.
Researchers, from Gaydon UK, analysed 1.3m invoices and found that 30% are paid late, however the real figure could be as high as 50%, the survey’s authors say.
Martin Williams, managing director of Gaydon UK, says he is concerned that many small businesses lack the ‘weapons’ to claim unpaid bills from clients.
Larger companies, on the other hand, are much more likely to have the financial ‘muscle’ to deal with these problems.
Martin Williams, said: “The sales ledgers we examined were owned by larger suppliers with sophisticated credit management set ups and more muscle to chase payments from their customers.
“Small businesses lack both of these weapons and therefore I would expect their experience of late payment to be worse than our sample.
“I would not be surprised at all if the percentage of overdue invoices is closer to 50 per cent than 30 per cent.
“This would mean something like £30 billion is sitting in company bank accounts when it should be residing in suppliers’ bank accounts.”
© Crimson Business Ltd 2006
