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“Trade credit is being used as a blunt instrument by many companies, with outdated practices poorly adapted to today’s new economic environment,” said Jon Keating, European Managing Director at Taulia.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.”
Could these new numbers signal the death of cash?
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