Late payment persist in causing businesses cashflow problems – and expected to get worse

The Edinburgh-based lender’s commercial banking division found that while overall business confidence remains strong (at 43 per cent) and may lead many businesses to consider investing in growth, those plans may be hampered by the fact that almost one in five (18 per cent) businesses admit to experiencing cashflow problems.

Late payment is cited by nearly three in five (59 per cent) of those businesses as being a major cause.

After late payment, other major causes of cashflow difficulties include fall in demand for products and services, as cited by 37 per cent, and default by customers (31 per cent).

The twice-yearly report, which is now in its 23rd year, canvasses the opinions of 1,500 UK companies, predominantly small and medium-sized businesses, and shows that 31 per cent expect the proportion of customers requiring deferred payment terms to increase in the next six months, up from 27 per cent six months ago.

Just seven per cent of businesses expect that proportion to fall during the second half of 2015.

Donald Kerr, managing director at Lloyds Bank Global Transaction Banking, which provides alternative sources of financing for customers including asset based lending and trade finance, said: “While the number of businesses suffering cashflow problems has fallen from a peak of 35 per cent in 2013, it remains stubbornly high.

“Cashflow is the lifeblood of any business but for too many businesses, late payments continue to be a significant problem. Where businesses do expect cashflow to be an issue, they need to take action to manage issues like late payment so that it doesn’t hamper their opportunities to grow.

“Specialist types of lending such as invoice finance can alleviate these pressures by allowing businesses to borrow against the value of their invoices helping them to avoid payment delays and improve cashflow.

“Thorough credit checks on customers and setting out clear payment terms at the outset of any relationship will also help.”