Late payment issues
The Close Brothers Business Barometer research has highlighted the ongoing problems that manufacturers face in coping with late payment of invoices.
The results have shown that such firms are typically owed larger outstanding sums than companies in other industries, making it problematic to invest in growth. In the most recent survey carried out in December, 41.4% of manufacturing businesses said they were owed between £21,000 and £40,000 in late payments whereas 33.8% of firms across all industries were owed as much.
As such, manufacturers’ operations are being constrained. December’s Barometer, for example, showed that 75.9% of manufacturers said late payments made cash flow difficult to manage.
The administrative burden is also higher among manufacturers: in December, 48.3% said they spent at least two days a month chasing up outstanding invoices compared with an overall average of 31.2%.
So why are manufacturers more prone to late payments? One possible reason is that they are likely to be doing business with larger customers which may feel more able to delay paying bills without worrying about upsetting their suppliers – an approach that smaller customers may be reluctant to take.
Equally, the nature of manufacturing provides more scope for customers to raise quality issues, for example, which can lead to delays in invoices being settled.
The importance of the right funding solutions
Whether it is dealing with late payments, coping with fluctuations in demand or looking for money to invest in new plant and machinery, access to funding is likely to be crucial for any manufacturer.
The challenging climate that manufacturers face means that, as much as in any industry, these firms need dynamic funding solutions that enable them to react quickly to changing market conditions. The right credit partner can help businesses identify a credit facility that is better tailored to their exact circumstances and needs.
The right lender will have the experience and willingness to play a more integral role in the company’s operations – for example in identifying potential issues in stock turnover and type of debt before they develop into more serious problems. Creating a solid, long term relationship with a more flexible provider today could pay even greater dividends in the long run.
