We all know that an overdue invoice represents a credit risk – and when that risk grows to envelop your cash flow, it puts you at risk of corporate insolvency.
New figures from the Asset Based Finance Association reveal that UK SMEs are now grappling with a conservative estimate of £67 billion in unpaid invoices.
This is based on those companies that report detailed information about their invoices – meaning many more will have overdue client accounts that were not included in the total.
The beleaguered construction industry, already hit hard by the slump in house-building during the recession, is among the worst-affected sectors.
ABFA found construction firms are left waiting for 107 days on average before their invoices get paid; the sector’s total exposure is £7 billion, 16% of its entire annual turnover.
But the issue affects SMEs across the board, with 14% of the UK’s entire annual SME turnover locked up in unpaid invoices at any one time.
A focus on credit control is crucial to unlock these valuable funds, free up cash flow, and escape the clutches of corporate insolvency.