Small-to-medium food manufacturers are now forced to wait nearly eight weeks for their invoices to be paid – two-thirds longer than larger competitors – according to the body that represents the asset-based finance industry in the UK and Ireland.
The ABFA has said that payment delays for the countries’ SMEs – those suppliers with an annual turnover below £25 million – have increased by another 4% in the past year, making it the second year in succession that delays have increased.
The association pointed out that, while payment delays have worsened for SMEs, they have improved for manufacturers with turnovers in excess of £500 million. In the past year, payment delays for the largest companies have improved by 6%; food giants now face less time waiting for their invoices to be paid than they did last year.
The AFBA said that so-called ‘price wars’ between British and Irish supermarkets were putting pressure on SMEs, particularly as they lack the bargaining power of larger companies, and that the situation could be exacerbated by the UK’s decision to leave the European Union.
ABFA chief executive Jeff Longhurst said: “Payment delays remain a very real problem for SME food producers, despite government efforts to counter the issue.
“Larger competitors are often more willing or able to place pressure on suppliers to abide by payment terms, whilst the value which many SMEs place on repeat business holds them back from doing so.
“Payment delays can present a real threat to these businesses – they place pressure on cashflow and can end up significantly restricting their capacity to expand order books. Even when a business is thriving, it can take just a few unpaid invoices to create a major problem.
“There are, however, some steps business can take to protect cashflow. Asset-based or invoice financing, for instance, enables firms to borrow against the value of their invoices before payment is received, or assets, freeing up funds to mitigate late payment. Careful financial planning can be key.”
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