Members of the UK200Group of independent accountancy and law firms have today commented on news that British SMEs are owed more than £500 billion in outstanding invoices; an increase of more than 70 per cent in two years. That’s according to the latest Lloyds Bank Commercial Banking Business in Britain research, which also reports that UK SMEs own almost £2.5 trillion of assets that could be used to fund further growth. This is a 220 per cent increase on 2014 when Lloyds Bank found that SMEs owned a total of £770 billion in assets.
Duncan Montgomery, Tax Partner at UK200Group member firm Whittingham Riddell:
SMEs often rely on a good quality credit controller for maximum effect and when that function is absorbed, replaced or the personnel changes, the role becomes difficult to pick up and drive forward. The best businesses adopt a specific approach time and time again:
· Have a job role that specifically includes this aspect
· Use systems and tools to get information to the controller, and KPI them on outcomes
· Call customers before payment is due to remind them and ask which run it will be in
· Involve management and sale force when it is sticky, make sure sales know that orders from certain customers are on stop until issues are resolved
· Actively encourage resolution of old sticking items and make sure that cash which is agreed as due is paid
Doing this has a huge impact and often reduces cash out by over 20 per cent when properly attended to.
Jonathan Russell, Partner at UK200Group member firm ReesRussell:
Lloyds Banking Group has a vested interest in highlighting that small businesses might be owed more from customers and have more assets and therefore suggest that they could borrow more. Reading statistics another way might be that small businesses make up more of the sales than used to be the case two years ago when absolutely no one was buying, so yes the debts would have gone up. That small businesses have more assets, which could be used for borrowing, might be because they have invested more of their past profits and there are actually more small businesses.
Finally, the report says small businesses might be able to borrow more money for growth; well maybe they don’t want to borrow or don’t need to, or maybe they don’t want to grow any faster than they already are. Doing these surveys is fine and interpreting the results is fine, but there are many conclusions that can be drawn from the same data. I don’t say my conclusions are correct but it does accord more with the clients I see.