Scots construction companies ‘need to cash in on their assets’

Scottish construction firms are being encouraged to use outstanding invoices as leverage to help generate more funding.

The Scottish office of Ultimate Finance, which provides funding to SMEs, is keen to raise awareness among construction companies that outstanding billing, be it ‘Uncertified Applications for Payment’ or invoices are one of their most valuable assets to help them avoid cash flow difficulties.

The firm’s campaign is on the back of research from the Asset Based Finance Association (ABFA) which has revealed that SMEs in the construction industry are second only to the manufacturing sector, in having the most unpaid outstanding billing.

Construction companies are currently owed £7 billion in outstanding billings, which represents 16 percent of annual turnover in the sector. However when it comes to payment times, construction companies are treated the worst, having to wait an average of 107 days before their billing is settled.

Euan Bell, regional director of Ultimate Construction Finance in Scotland, believes the sector is lagging behind other industries when it comes to treating their outstanding billing as an asset with which to leverage funding.

“With banks still reluctant to lend and companies taking longer to pay, businesses across all sectors are increasingly turning to receivables finance,” he said.

“Opinions have changed about using this type of facility, as companies realise that they can have the money owed to them within as little as 24 hours, rather than having to wait for months before they get paid.

“We understand that companies don’t want to upset their customers by putting too much pressure on them to pay but, at the same time, it is grossly unfair to have to wait so long as goods and employees have to be paid for in the meantime, which puts a huge strain on the cash flow. It has even caused some companies to go bust.

“As a business Ultimate Finance has increased its live clients by 55 percent and increased the money we are lending out against assets, such as ‘Uncertified Applications for Payment’ and invoices, by 52 percent over the last 12 months, demonstrating the growth in popularity for this kind of lending.

“However many companies within the construction sector are still unaware that outstanding billings gathering dust in a file can be turned into cash, providing them with much needed funds to grow the business.

“It may be a worthwhile exercise to calculate how much you are owed in outstanding ‘Uncertified Applications For Payment’ as well as invoices and then consider how the company could benefit if they were all paid.”