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Businesses are waiting an extra three days on average for payment of invoices, creating problems with cash flow, according to the latest research from Dun & Bradstreet.
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Cash flow issues hitting SMEs
01 February 2025
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6 minute read
The research indicates that businesses were forced to wait an average of 56 days for payment in the first quarter of 2014, compared with 53 in the last quarter of 2013.
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Scottish Pacific chief executive Peter Langham said delayed payments can inhibit the ability of SMEs to manage cash flow, a crucial component of an SME's success.
"As debtor days drag out, cash flow issues will be putting a strain on SMEs," Mr Langham said.
"SMEs need to be looking at big picture issues such as whether they are financing their business in the most effective way, through to smaller, everyday actions they can take to improve cash flow," he said.
Mr Langham suggested four ways in which SMEs can speed up the collection of payments to better manage their cash flow:
1. Raise invoices in a timely manner, issue the invoice as soon as the job is done or the goods are despatched and don’t wait until the end of the month.
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2. Make invoices easy to pay. Make sure invoices include all relevant details, such as the customer order reference, the date payment is due, your bank details, whom to contact if there is a query and a full description of the goods or services provided.
3. Separate sales from debt collection. Make sure those responsible for any sales are not responsible for collecting payment. Have two distinct roles within your organisation where responsibilities are clear.
4. Credit check customers regularly. Don't chase turnover, chase profit - and there's no profit in a sale unless you get paid. Running regular credit checks will improve your likelihood of getting paid, and paid on time.
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