Wales manufacturing SMEs could unlock £ 1.1bn through invoice financing

A new study from Siemens Financial Services (SFS) estimates that £ 1.1bn could be freed up for manufacturing SMEs in Wales through the use of invoice financing.[1]

The report, titled ‘Money Trapped in Manufacturing – Wales’, recognizes late payments as a particular problem for SMEs in the region. Businesses in Wales have an average of 27 days past maturity (DBT) before they receive their money.[2]

The manufacturing sector is an important part of the Welsh economy, producing around 18.7% of the region’s non-financial commercial output, the largest of all other regions.[3] The manufacturing sector is largely made up of SMEs that operate within a complex supply chain involving companies from the UK and around the world, but who are more prone to cash flow problems than their larger counterparts.

Using invoice financing, when a business invoices its customer, up to 90% of the approved invoice total is immediately advanced by the financing provider, with the remaining 10% paid after the customer has paid the balance. . This provides the business with essential working capital so that it can then invest in expanding its business without having to wait for bills to be paid.

The financing of invoices allows SMEs in the manufacturing sector to tackle the problem of slowness and / or late payment themselves; unpaid invoices can be used as an opportunity rather than a burden.

Samantha Fray, Business Development Manager – Wales, Siemens Financial Services, says: “Manufacturing is an extremely important contributor to the Welsh economy, and tackling late payments for SMEs is critical to the integrity of industry.

“More and more SMEs are looking for alternative solutions to fill the gaps in late payment. Compared to traditional lines of credit, invoice financing is a flexible way for SMEs to take control of their cash flow and focus on significant growth potential for the future.

To download the report, click here:

https://assets.new.siemens.com/siemens/assets/api/uuid:b1eb7226-265a-4de0-8b9f-7df92346ea51/version:1578660443/sfs-uk-trapped-cash-wales-v2.pdf

[1] By taking the average manufacturing DSO and applying it to the sales of manufacturers in the region, we can estimate the value of outstanding payments. The proportion of companies not eligible for invoice financing was then eliminated. This figure is then multiplied by 90% for the amount advanced via invoice financing, and halved to eliminate any exaggeration due to, for example, ineligible invoices and the current penetration of invoice financing marketing.

[2] Small Business, How to Handle Late Payments, 2018, https://smallbusiness.co.uk/how-to-deal-with-late-payment-2100323/

[3] Make UK, ‘Regional Manufacturing Outlook 2018’, https://www.makeuk.org/insights/reports/2019/02/13/regional-manufacturing-outlook-2018


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