The United Kingdom’s economy is on shaky ground. It could improve or it could become worse again. Given the economy’s current position one move could make things fail again. Part of the problem is the cycle companies find themselves to be in. Business to business payments are late. Experian did a study in late payments as part of their usual credit worthiness and reporting methods. They found that these late payments are higher than they have been in a three year time span. In the last quarter of 2010 it was seen that late payments increased by 16 per cent. This makes the average invoice for a company more than 25 days late.
Experts in the industry stated they are not surprised to see such an increase with late payments. Businesses want to hang on to the capital that they have rather than pay their debts because the times are difficult. However, there is a warning out that if businesses continue in this manner it would have a huge and lasting effect. It would be a cycle that is hard to break. If all businesses were to take on this strategy growth would be nearly impossible for these companies. In fact it would be a problem for all companies that are tied in any way to those holding on to capital. Money has to move around in order for growth to occur.
Businesses do have to react to financial changes. Those that do not change will be left behind. It could result in problems finding capital to keep the business moving. Late payments are an indicator that a business is either holding on to their capital or that they do not have any to pass around. Late payments are also seen as an indicator for where the economy is and what might happen in the following months.
Experian information can be used by banks after it is published. The banks can use it to make decisions on how, who, and what to lend. Experts state a warning that these results from Experian could make it harder on certain types of companies such as SME’s that are trying to get funding. They may find it near impossible to get bank loans.
There are options available online for finance comparison services. These services will help businesses find a way to secure cash to increase their cash flow when they are not being paid on time. Invoice factoring and invoice discounting are two choices available that may provide a way for you and your business to remain open and working properly.
Invoice factoring is the sale of invoices to a third party. The third party can charge a fee and award only a percentage of the invoice amount. The third party then receives the payment in full from the customer once the customer pays. Invoice discounting is more like a loan. A company will offer around 80 per cent in a loan with interest and fees, and the holder of the invoice has to pay that money back once they get the money from their client.