Cash-flow blues as manufacturers forced to chase invoices

Small and medium sized enterprises (SMEs) in the manufacturing sector spend an inordinate amount of time chasing invoices compared to counterparts in wholesale, retail and catering, according to a new study.

The research, conducted by Continental Research for corporate funding specialists GMAC Commercial Finance (GMAC CF), looked at how long companies turning over between £350,000 and £10m spent chasing overdue invoices each week.

According to GMAC CF, manufacturing SMEs typically spend four-and-a-half hours a week chasing invoices, compared to 1.2h in agriculture, 2.6h in transport and communications, 2.5h in construction, 4.4h in wholesale, 1.49h in retail, 2.1h in hotels/catering and just 0.3h (20 minutes) in property.

The only sector spending longer chasing unpaid bills was business services, in which SMEs typically spent 5.2h a week trying to claw back their cash.

The study, which comes in the wake of Sainsbury’s attempt to lengthen payment terms to suppliers without renegotiating commercial terms, reveals how entrenched the UK’s late payment culture has become, said Nick Grainger, area manager for GMAC CF invoice finance.

“These shocking statistics underline the difficulties that SMEs in the manufacturing sector face on a daily basis. Many small businesses operate on tight margins and are under constant pressure to maintain cash flow. Yet their ability to do so is severely hampered by habitual late payment.

“As a result, small businesses are being forced to devote a huge amount of time to recovering debts, which ultimately limits their growth and expansion capabilities, and even their chances of survival.”