According to Gerald Irwin of Sutton Coldfield Licensed Insolvency Practitioners and Business Advisers, Irwin Insolvency, small businesses are currently losing well over £6.5 billion every year due to unpaid invoices.
It is estimated there are around 4 million SMEs in the UK with a combined annual turnover of £1,153 billion. The staggering amount written off annually in bad debts means that these businesses are each losing an average of £16,250 each year in unpaid invoices. This represents a massive 6% of their turnover.
Said, Gerald Irwin, “The actual cost to a business is often much greater than just the unpaid invoices themselves. The time taken chasing payments and the lost income due to lack of funds must also be taken into account. In many cases, poor cash flow situations like this can often lead to small business owners seeking external investors thus giving away equity in return for cash to grow their businesses”.
Outstanding invoices are often seen as a bit of a burden for SMEs. However, they could be viewed as the largest asset on the balance sheet. Factoring and invoice finance services can provide businesses with a viable alternative to both external investment and expensive overdraft or loan facilities. As well as providing advances of up to 90% of the invoice value, a factoring company can also manage the whole process of issuing invoices, collecting payments and can also remove the risk of bad debts affecting the company’s turnover.
“Whilst many small business owners will think of their bank overdraft or a personal loan as their first and, sometimes only option when faced with cash flow problems, the popularity of factoring and invoice services is growing steadily with over £115 billion invoices transacted during last year”, commented Mr. Irwin.