SMEs - The Backbone of the Economy at Breaking Point

The latest UK figures show that SME businesses make up almost 60% of the private sector workforce, and account of 52% of business turnover.  And yet, with the economy still struggling to emerge from recession, many are hampered by sluggish cash flows and a general lack of liquidity.  In fact - SMEs across the country now face a staggering £18.6bn late payment problem – representing an increase of almost £3bn from previous years.

The Catch-22 Of AP
At the very time when businesses need quick and easy access to their cash, their clients are finding more and more excuses to defer payment for as long as possible.  The effect of this only ever goes one way – an increasingly tight girdle around the economy, where fear of recession and contraction in corporate payment strategies actually becomes a self fulfilling prophecy.

What this has all meant, is that many small to medium sized businesses have often had to go cap in hand to their banks in order to sell their invoices at large discounts just to increase cash flow.  The Federation of Small Businesses (FSB) has firm views on the prevailing economic conditions and prompt payment.  John Wright, the Chairman of the FSB said:

“Nearly half of FSB members said they have seen an increase in payment times from invoicing to full payment over the past two months, while a further one in three has seen a hike in costs of existing and new finance”.


Solution Providers step in where Banks Fail

Increasingly, many organisations are turning to solution providers to enable them to fulfil their obligations both to their own vendors, and to increase their own corporate liquidity.


Solution providers such as Invapay act as a “Master Merchant” on behalf of their corporate buyers and settle all suppliers via BACS.  They:


  • provide a simple way to order from and pay suppliers on time
  • improve cash-flow and liquidity and reduce the administrative
    costs of chasing late payments.
  • address One-Time-Only Vendors in a frictionless way with instant,
    real time vendor set up.
  • provide level 3 line item and VAT detail for all transactions
    drive PO compliance
  • remove paper from the process
  • reduce the administrative burden on buyers and suppliers
    use the GPC programme to enhance rebate opportunities

Corporate obligations towards paying SMEs on time, was enhanced by a Government directive for all public sector bodies to pay their suppliers within 10 days at the end of 2008.  This was recently reduced even further in the March 2010 budget. In fact all Government bodies must now pay 80% of all undisbuted invoices within 5 days. Recognising the potential for a lack of cash flow to gain a strangle hold on many smaller businesses, the then Secretary of State for Business, Peter Mandelson said:


Businesses tell us they need cash flow. That’s why central government has committed to pay businesses within 10 days – and we’re urgently speaking to the larger public sector to extend this commitment. We want everyone in the supply chain to pay their bills more quickly”

Recognise the Problem & Do Something About It
So, recognising the problem is one thing – being able to do something about it is another.  Some organisations struggle with the practicalities and commitment to investment that new solutions represent.  However, once that new solution is uncovered, many are surprised how quickly their purchase to pay cycles can turn around.  In fact, many wonder why they didn’t approach this area of their business much earlier.


Invapay solutions in the Public Sector

  • Invapay can assist the UK Public Sector to become more
    innovative and pay SMEs in 3 to 4 days reducing significant
    administrative costs, process costs and improve cash-flow
  • vendor ‘onboarding’ or supplier adoption is handled in a fraction
    of the time of normal merchant acquisition
  • control and compliance can be assured through Invapay
  • the significant high costs of setting suppliers up on ERPs for a onetime
    only purchase are eliminated

With payment being the fuel of the UK economy, Invapay is an engine which will assist and accelerate economic growth


At a time of economic stagnation and nervousness, organisations need to maintain the entrepreneurial spirit which started them in the first place.  Now is not the time to be overly cautious, now is the time to prudently invest in solutions which will add value to the bottom line and help you maintain your competitive edge.