The Interface Financial Group (IFG), North American largest alternative funding source for small businesses, offers 'spot factoring' help small businesses struggling with raising capital to fund growth prior to economic recovery.

A quarter of the UK's small and medium-sized businesses are suffering because customers are paying bills between 30 and 60 days late, research published this week shows. Figures compiled by RBS and NatWest found that such delays are causing major cash flow pressure for businesses. One in five SMEs reported being owed on average between GBP 50,000 and GBP 100,000 a month in late payments.

Manufacturing firms are most at risk from the impact of late payments, the research found, with 28 percent owed more than GBP 100,000 in unpaid debts each month, compared with a UK average of 8 percent.

It's not just the private sector triggering delays, according to the Federation of Small Businesses. Its Voice of Small Business survey, published last year, found local councils were paying a quarter of all invoices late, and central Government and Government agencies made one in three payments late - despite the Government promising to pay within 10 days at the start of the recession in 2008.

Figures from the insolvency practitioners' trade body R3 show that 27 percent of corporate insolvencies were triggered by another company's collapse.

For most firms, the situation has eased since the height of the recession. The Late Payment Index, from credit rating group Experian, found that UK businesses paid their bills an average of 22.6 days late during the third quarter of 2010, half a day quicker than the 2009 average.

What can SMEs do about it?

The government-funded advisory group Business Link says companies should contact late-payers to try to resolve the issue first. But although most companies include a deadline in their payment terms, enforcing it can be difficult. Late payment legislation means firms have a right to charge interest and debt recovery costs on late payments - but much depends on a firm's size.

Paul Barnsley, chief operating officer for The Interface Financial Group (IFG) said, "Smaller businesses have limited bargaining power with bigger buyers," says Paul, "SMEs can request payment faster, but often feel as if they don't have a choice - they don't want to impose stricter trading terms that could damage a trading relationship."

SMEs shouldn't underestimate the importance of sending a correct invoice: making a mistake or forgetting a reference number can trigger long delays in processing payments.

Small businesses rarely have a credit-control department, and it is left to the business owner to chase a payment, when they could be working on developing their business. Businesses should ensure they have written contracts which clearly set out payment terms so a business owner knows when they should be paid and businesses shouldn't be afraid to chase payment. All correspondence with customers should be logged, including telephone calls.

In short, businesses should ensure accurate invoices are sent to the correct person, clearly stating the date payment is due.

Alternative options

Debt factoring and invoice financing are potential credit routes for firms struggling because of late payments. These involve selling invoices to a third party, either a specialist provider or a bank.

Paul Barnsley (C.O.O of IFG) Said "A lot of companies have the perception that firms using invoice discounting to manage their cash flow are in distress. That's not the case - it can just be a very efficient way of managing cash flow."

The Interface Financial Group ( www.ifgnetwork.co.uk ) provides short-term financial resources including invoice factoring (invoice discounting). IFG launched the UK operation in 2010 following the success of its New Zealand, and Australia businesses which launched in 2004, and 2006. IFG's innovative products also includes spot factoring - the purchase of a single invoice or number of invoices. IFG does not require the whole debtor book.