The late payment of invoices has long been a thorn in the side of small businesses, but the impact of the coronavirus is set to make the pain particularly acute. How can small firms, already struggling to stay afloat, manage the impact and maintain cash flow?

According to new figures from the Federation of Small Businesses, small firms are facing a spike in the incidence of late payment as a result of the pandemic. FSB research reveals that almost two thirds of small businesses have had invoices paid late or unpaid during the crisis.

One of the worst small business sectors hit by the new surge in late payment and payment freezes is wholesalers, with legal practices, accountancy firms and marketing agencies also badly affected.

The upturn in late payment comes at a particularly bad time for small businesses. The Covid-19 crisis has left a large number of these firms on their knees and fighting for survival. They face a battle to reopen and earn revenue in a flattened economy, and to repay government loans.

Is a lasting solution to late payment likely?

Large organisations are reportedly the worst offenders in terms of late payment and the FSB has called on the government to make proper payment terms, of 30 days or less, part of their furlough scheme or coronavirus loan contracts. It has also asked for the Prompt Payment Code to be toughened.

Whether the government responds to these requests remains to be seen. The momentum built behind decisively tackling the problem of late payment had been largely lost in the months before the outbreak of the coronavirus, so small businesses owners are unlikely to be optimistic.

Furthermore, the Prompt Payment Code has long been considered as a little more than a token effort at addressing late payment by the small business sector, especially given the scant regard given to the Code by some of its signatories. As such, few will expect this initiative to be meaningfully muscled up.

What can small firms do to manage pandemic-related late payment?

So, how can small firms manage the impact of Covid-19-related late payment?

Invoice finance is one tool that small business can use to help manage the pressure that late payment puts on cash flow and capital resources.

How invoice finance can help protect against late payment

In the wake of prolonged caution from traditional lenders, alternative finance is proving a vital source of capital for small businesses, both for maintaining cashflow and for essential investment. The most widely used alternative finance facility is invoice finance, which can offer protection against late payment.

This easily accessible, affordable and flexible service allows businesses to secure capital and safeguard cashflow without jeopardising key business relationships. As much as 90% of an approved invoice can be advanced by a finance provider, with the remainder settled by the customer.

An increase in the incidence of late payment is the last thing that small businesses need. But until a lasting solution is found, they have to manage the impact. To do so, in particularly at such a challenging time, business owners need to be aware of all the finance options available to them, including invoice finance.

To find out more about A&T Business Associates services, contact Tony Hedger on 01903 602211 or tony.hedger@atbusinessassociates.co.uk.