It’s a classic cashflow management strategy: wait as long as you can before paying your suppliers.
But with many businesses across the country still struggling, the cumulative effect of these delayed payments is staggering.
Some £75bn is owed to suppliers by their business clients, according to new research.
To give you a feel for the magnitude of that figure, it is equal to the amount the government is hoping to cut the UK economic deficit by in 2015-16.
Total trade credit now stands at £327bn, making it the number one funding source for businesses, according to the research from the Credit Management Research Centre and Taulia. That £327bn is 20% larger than bank credit to businesses.
The main culprits of the enormous debt burden are small and medium-sized companies, the report found.
“Trade credit is being used as a blunt instrument by many companies, with outdated practices poorly adapted to today’s new economic environment,” said Jon Keating, European Managing Director at Taulia.
“We believe this is a serious threat to the UK economy. A business that can demonstrate it is in control of its trade credit will have more options open to it to secure strategic finance for growth.”
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