Manufacturing SMEs in the East Midlands could unlock £1.5bn through invoice finance

New research from Siemens Financial Services (SFS) estimates that £1.5bn could be freed up for SMEs in the manufacturing sector in East Midlands England through the use of invoice finance.^[1]

The report, entitled ‘Trapped Cash in the Manufacturing Sector – East Midlands’, recognises that late payments are a particular problem for SMEs in the region. On average firms in the East Midlands are made to wait 41 days before they receive their money, four days more than the national average.^[2]

The manufacturing sector is an important part of the East Midlands’s economy, producing around 16.7% of the region’s non-financial business output.^[3] Manufacturing is largely made up of SMEs which operate within a complex supply chain involving firms across the UK and the world, but which are at more risk of cash flow problems than their larger counterparts.

By using invoice finance, when a company invoices their customer, up to 90% of the approved invoice total is immediately advanced by the finance provider, with the remaining 10% paid once their customer settles the balance. This provides the company with essential working capital so it can then invest in expanding its business without having to wait for bills to be paid.

Invoice finance enables SMEs in the manufacturing sector to tackle the issue of slow and/or late payment themselves; unpaid invoices can be used as an opportunity rather than a burden.

Samantha Fray, Business Development Manager – East Midlands, Siemens Financial Services says, “The East Midlands has one of the highest proportions of manufacturing outputs within the UK, so it’s important that SMEs aren’t held back with debilitating cash flow issues.

“More and more SMEs are looking at alternative solutions to fill the gap when it comes to late payments. Compared to traditional lines of credit, invoice finance is a flexible way for SMEs to take control of their cash flow and focus on significant potential growth for the future.”

To download the report, click here:

https://assets.new.siemens.com/siemens/assets/api/uuid:946658f8-5e21-4644-aadc-c40b48a75af9/version:1578661450/sfs-uk-trapped-cash-eastmidlands-v2.pdf

[1] By taking the average manufacturing DSO and applying this to the turnover of manufacturers in the region we can estimate the value of payments left outstanding. The proportion of companies not eligible for invoice finance has then been removed. This figure is then multiplied by 90% for the amount advanced through invoice finance, and halved to eliminate any exaggeration due to, for example, ineligible invoices and current invoice finance marketing penetration.

[2] Pay UK, ‘Late payments report shows clear problems for small businesses in the UK’, 2019, https://www.turnerlittle.com/news/late-payments-report-shows-clear-problems-for-small-businesses-in-the-uk/

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