British SMEs are owed £67bn in unpaid invoices, with manufacturing and construction companies the biggest victims.
Research by the Asset Based Finance Association (ABFA) said the huge total is up eight per cent from £62.5bn twelve months ago and 36 per cent higher than the £49.5bn in 2011 – revealing a worsening in the problem of overdue payments and extended payment times.
It builds on previous studies showing that SMEs are now waiting an average of 72 days for payment of invoices, up from 61 days at the height of the recession in 2009.
ABFA warned that the £67.4bn figure in unpaid invoices is likely to be a conservative estimate of the true value of unpaid invoices, as it only reflects the invoices of 180,000 SMEs that report detailed accounts. The true total value is likely to be significantly larger, it added.
Manufacturing and construction are among the sectors where SMEs have the highest value of unpaid invoices.
The ABFA said that outstanding invoices from SMEs in the construction sector currently stand at £7bn amounting to 16 per cent of annual turnover in the sector.
Small and medium-sized manufacturing businesses are owed £13.4bn by customers, which represents 17 per cent of their annual turnover. Across SMEs as a whole, unpaid invoices amount to 14 per cent of annual turnover.
Separate research by the ABFA recently showed that construction businesses wait an average of 107 days for payment of invoices, while manufacturers must wait 61 days on average.
However the ABFA encouraged businesses not to view unpaid invoices as an unavoidable drag on cashflow, but as one of the most valuable assets which can be used to unlock funding.
ABFA, an organisation with members ranging from high street banks to independent specialists offering finance secured against the value of invoices, said that, whilst the recovery is taking hold, businesses are not accessing the finance that could allow for investment and growth.
Members of ABFA, it said, currently provide £9bn in finance to SMEs against the value of invoices, and at any one time will be providing £19.3bn overall in asset based finance to businesses.
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Jeff Longhurst, chief executive of the ABFA, commented: “The scale of unpaid invoices to Britain’s SMEs has become enormous, but there is no reason for it to become a barrier to investment and growth. Businesses need to recognise that their unpaid invoices are an asset.
“In many cases, they are the most valuable asset an SME has, and they can be the key to unlocking critical and affordable funding. Invoice finance is playing a bigger role than ever in funding British and Irish businesses’ growth, and it is now an established part of the funding mix for a huge number of SMEs. But it can also help many more businesses.”