Almost a quarter of small and medium-sized businesses in Yorkshire and Humberside are in the dark about how much money they are owed in unpaid invoices, research by funder Bibby Financial Services has revealed.
In total, 23 per cent of SMEs in the region were unable to say how much they have outstanding. Of the businesses that did know, one in five (20 per cent) said they were owed more than £20,000 and 11 per cent were owed more than £50,000. Nine per cent were owed in excess of £100,000.
Mark Storey, MD for Bibby Financial Services in Yorkshire and Humberside, believes the findings highlight ongoing difficulties small businesses face in managing credit control.
He said: “Having a robust credit control process in place, and being able to chase invoice payment is the key to effective cashflow management which is critical for any business.
“But many small businesses – particularly those with few or no employees – cannot effectively manage outstanding payments because they are focused on developing new business and fulfilling existing orders.”
Findings of the study – conducted among 1,000 UK small and medium-sized enterprises in Q3 – represent a barrier to growth for thousands of small businesses throughout the country.
The issue is particularly acute in the hospitality sector, with two thirds (67 per cent) unsure of the amounts owed to them. Meanwhile, almost four in ten (39 per cent) transport and distribution firms admit to being unclear about what was in their payment pipeline.
Mr Storey added: “This represents a significant amount of money owed to UK SMEs and the value of these outstanding invoices could be reinvested into businesses in the form of recruitment or technology.”
The specialist funder is calling for more businesses to consider forms of finance that help bridge the payment gap, or to consider outsourcing the collection of payments to specialist providers.
Storey added: “Invoice finance not only provides working capital to allow businesses to operate more effectively, but funders can help SMEs to take control of invoice payment, credit control and sales ledger management.”