Unpaid invoices burden expected to worsen

A third of small firms fear the burden of late payments will get worse over the next six months, a new survey has shown.

Colin Walls said small firms can unlock working capital through invoice finance or asset-based lending

The study, by Bank of Scotland, found the typical small business north of the Border is owed more than £79,000 by customers – an increase of 59 per cent over the past two years.

And the problem is likely to get worse during 2016, with 32 per cent expecting more of their customers to demand deferred payment terms in the next six months.

Colin Walls, head of trade and working capital at Bank of Scotland, said: “36 per cent of businesses in Scotland told us that late payments were affecting their cashflow, and with the amount of money owed to them in unpaid invoices, it’s not surprising.

“Yet having this volume of unpaid invoices – as with cash tied up in physical assets – needn’t prevent firms from having sufficient working capital to invest in growth.”

The bank’s research found that Scottish businesses own an average of almost £489,185 of assets that could be used to fund further growth – more than three times the amount owned in 2014.

Walls said: “Different types of funding such as invoice finance or asset-based lending can help unlock the working capital that they need, allowing businesses to grasp more of the opportunities that exist at the moment.”