Colin Walls: Unlocking the future of Scotland

There is a perennial issue that can prevent Scottish SMEs from planning for the future as confidently as they would like '“ and it's getting worse.

Colin Walls, head of trade and working capital at Bank of Scotland

According to our latest research, almost one in eight (12 per cent) admit to having cash flow problems.

While this is slightly down on six months ago, when 15 per cent flagged the issue, over a third (36 per cent) cited late payments as the biggest cause, ahead of falling demand (18 per cent).

That’s no surprise when you consider that the average Scottish SME is owed more than £79,070 in outstanding invoices, while almost a quarter (24 per cent) are owed £200,000.

The problem may be an unhappy consequence of good news – experiencing an upturn in orders – but even so, the problem looks likely to get worse during 2016, with 32 per cent of Scotland’s small businesses expecting more of their customers to demand deferred payment terms in the next six months.

But far from being a handicap, with the right financial support, having tens of thousands tied up in unpaid invoices is actually an opportunity for firms to get their hands on capital to invest in growth.

Alternative forms of finance like invoice and supplier finance can simply and quickly release these funds that are tied up in your business.

Invoice finance, for example, can allow companies to access up to 90 per cent of an invoice’s value within 24 hours of it being issued. By taking the guesswork out of payment times, this gives businesses greater control of the working capital they have access to. Because it can grow with a company’s turnover, it can also give them greater access to capital as their order books grow.

We also work with larger mid-market firms to help provide security and certainty for the SMEs in their supply chain.

Our supply chain finance products enable firms with turnovers topping £100 million to have their suppliers’ invoices paid within a week, so SMEs can take advantage of earlier payment of their invoices while the buyer can be confident that their critical suppliers are receiving the financial support they need.

Unless the nation’s businesses look at ways to unlock the value tied up in their assets, both they and the Scottish economy are likely to be held back.

Indeed, failing to take advantage of invoice finance and other forms of alternative finance could be stunting not only their growth, but potentially the entire supply chain beneath them.

By being a little more imaginative about how the country’s SMEs fund their futures, together we can create a more prosperous future for Scotland.

• Colin Walls is head of trade and working capital at Bank of Scotland