Wednesday, 23 May 2012 14:03

£64bn in capital held up by late payment

Late payments to creditors by UK PLC’s are being used to add to the working capital companies have at their disposal, according to a new report from Deloitte.

The professional services provider has analysed the working capital performance of 20,800 companies with global operations over the past five years, enabling it to compile a £64 billion estimate of excess working capital in the UK - a rise of £3 billion since 2010.

Much of this capital is achieved through delayed payments, which led to the average late payment being made a week later in 2011 than in 2009.

Deloitte warns that this can have negative reputational effects for companies that delay payments to their suppliers, leading to poor supply chain relations in the future, and knock-on effects on cost and viability.

'18 months of national debt payments'

Andrew Harris, partner in Deloitte's advisory development group, puts the £64 billion figure into perspective by comparing it to the national debt.

If the money were put at the UK government's disposal, he says, interest payments on governmental debt could be made upfront for the next 18 months.

He adds that effective use of cash is likely to remain a priority for British businesses in the months to come, due to the current economic conditions.

But he also says: "The paradox is that, with the appropriate focus, working capital can be one of the cheapest and most accessible forms of funding available to a business."

Deloitte claims that releasing this £64 billion of capital could help to restore economic growth in many businesses, as well as allowing them to deal with temporary downturns in the market.

For suppliers facing late payments as their clients hold out on their invoices for a week longer than was the case two years ago, it's a difficult situation - and the overall liquidity of the UK economy appears to be suffering as a result.

Content continues below

Late Payment 'Must be Stopped' in Fashion Industry

Some of the most desirable fashion brands make less desirable customers, due to poor payment practices and frequent late payment, according to an industry news provider. Business of Fashion spoke to…

Why the Man of Steel Would Make a Super Debt Collector

Superman is BACK with the cinematic release of Man of Steel, and it got us to thinking about whether or not the Kryptonian comicbook hero would be a worthy addition to the Safe Collections team. We…

Fake 'B2B Debt Collectors' Jailed for Fraud and Dishonesty Offences

Four scammers from East Lancashire have been jailed for fraud and money laundering offences after using a string of fake debt collection companies to fraudulently obtain thousands of pounds from…

Anonymous 'Testimonials' Aren’t Worth the Paper They Are Written On

Now we know that Debt Collection and Debt Recovery don’t have the best reputation in business markets, this is one of the reasons we take pride in displaying a small selection of the hundreds of…

'Effective cash management is important'

Just as the economic turbulence is to blame for the focus on capital, Mr Harris argues that it also renews the importance of keeping a close eye on financial management for firms of all kinds.

"The nature of working capital is such that effective cash management is important during recessionary periods, to provide protection against market uncertainties, while in expansionary periods it can fund controlled growth," he explains.

Certain sectors are facing specific obstacles that must be overcome through effective cash management - for instance, retailers who are experiencing subdued sales in the present climate are looking to ways that they can bridge those gaps.

Pharmaceutical firms, meanwhile, are funding growth and industry consolidation using the benefits from working capital programmes.

If your organisation is in these industries' supply chains, or indeed in any other sector, the challenge is to ensure your credit control and debt recovery procedures are enforced in such a way that your own capital is not put at risk, while continuing to forge positive business relationships both during the recession, and for when the economy begins to recover.

If you would like to find out more about how we can help your business maximise its available capital whilst protecting the relationships on which good business depends, click here to Contact Us.

Over 150 Years Of Industry Experience

Our modest but highly skilled team has a combined total of over 150 years of experience in commercial credit management and B2B debt collection. From independent IT contractors to major film and TV publishers, Safe Collections has the knowledge and experience you need to get paid quickly and cost effectively.

Image Big Business by Herr hans Gruber is licensed under CC BY 2.0

8:00 - 20:00

8:00 - 20:00

Our Opening Hours Mon. - Fri.

+44 (0) 1772 454505

+44 (0) 1772 454505

Got questions? Call us today. No hard sell, guaranteed. 

© Safe Collections is a trading name of Safe Collections Limited. Incorporated 1984. Company Number: 01815264. VAT Number: GB407358159. All Rights Reserved.