Some good news for SMEs: according to a new report, businesses are paying their bills more quickly (or less slowly). But what’s behind the improvement in payment times? One factor is invoice finance.

Late payment has long been an Achilles heel for small businesses, with delays causing cashflow problems that have been difficult to solve with traditional SME finance. A recent survey from Lloyds TSB identified late payment as a major issue for SMEs. However, new data from commercial information firm D&B suggests that there is light at the end of the tunnel.

According to D&B, the average time a British business takes to pay its bills has shortened by two days. The average is still 15 days late than agreed payment terms, but the research suggests that the momentum is heading in the right direction.

So, what is behind the improvement in payment times? The EU Payments Directive has been updated, making pursuing payment easier for SMEs, and the Prompt Payment Code continues to be backed. However, looking beyond guidelines, the upturn in alternative finance, and in particular invoice finance, is likely to have played a key role.

The use of invoice finance has grown markedly in recent years as SMEs have had to look beyond traditional lenders to maintain cashflow. Part of its attraction, besides flexibility and transparency, is that it offers a means of ensuring prompt payment of invoices. The facility is particularly useful for SMEs dealing with large companies that use extended payment terms.

As optimism continues to gradually build within the British small business industry, a decline in late payment is a definitive boost. However, it is vital that this momentum continues and, along with regulatory reform, invoice finance has a key role to play.

To find out more about A&T Business Associates services, contact us on 01903 602211 or info@atbusinessassociates.co.uk.