South: Late payment exacerbates cashflow problems, shows Lloyds TSB

According to new research by Lloyds TSB Commercial Finance, more than a quarter of the UK’s SMEs are experiencing cashflow problems, with over half of these firms attributing this to late payment.The data is taken from the bank’s bi-annual ‘Business in Britain’ survey, which questioned over 1,700 firms across the country in a variety of sectors about issues affecting them.

The research shows a slight fall in the number of firms experiencing cashflow difficulties in the past six months. The latest results show that 29% of firms had problems with their cashflow, compared to 35% in January 2013.

Of those SMEs experiencing cashflow difficulties, 58% attribute these problems to late payment. The number of firms attributing cashflow problems to late payment has increased slightly from six months ago, when the figure stood at 54%. However, late payment is still the single largest cause of cashflow problems, followed by a fall in demand or lack of business (34%).

Lloyds TSB Commercial Finance, which provides businesses with asset-based lending and invoice finance, is urging companies to sign up to the Prompt Payment Code* to ease the pressure of late payments on SMEs.

Managing director Donald Kerr said: “Our research shows that over a quarter of SMEs in the UK suffer from poor cashflow. While this figure has fallen slightly from the previous six months, the number is still significant. What’s even more striking is that late payment remains the number one cause of poor cashflow for small and medium-sized firms.

“Businesses can help to ensure they are less likely to encounter late payments by setting out clear payment terms with customers, and carrying out background checks. For many firms, invoice finance can also help them manage the payment gaps, allowing firms to borrow against the value of current invoices.”

* Lloyds Banking Group has signed up to the voluntary Prompt Payment Code. Established by the Institute of Credit Management, the Code is endorsed by the Government and signatories commit to pay suppliers on time, give clear guidance on their expectations of suppliers and encourage good practice in other businesses.