£40bn in late payments could revitalise the post-Covid economy- says Oxygen Finance
Oxygen Finance the UK’s leading provider of early payment programmes is calling on big businesses to change their payment practices to release liquidity as we come to the end of the UK furlough scheme.
It is estimated that £40bn is owed in late payments to firms across the UK with many of these being SMEs that are desperate for cash flow as they try and get furloughed employees back into work. UK businesses still routinely uses payment terms ranging from 30-90 days rather than opting for shorter or immediate payment options.
Ben Jackson, CEO Oxygen Finance, said: “From the 1st October 1.6 million workers will come off the Covid furlough scheme. There is a real need to get these people back to their jobs, but this is threatened by cash flow pressures businesses are facing. In 2021, technology allows payments to be fast, secure and transparent, it makes no sense to continue using old-fashioned payment practices, with payments sometimes made three months after the services or products have been provided.”
Historically, suppliers have been required to bridge the financial gap between the services being received and the payment made. This forces firms to use expensive overdrafts, loans, or alternative funding arrangements.
“For many businesses, the end of furlough will be a Catch-22 situation, which will put a huge strain on cash flow as they try and meet a dramatic increase in their employee payments. They need the returning employees to create the revenues to keep their businesses going but can’t afford to pay staff until they receive payments. They are therefore forced to bridge the financial gap, which adds a further cost to their business.” added Mr Jackson.
It is estimated that £66bn in support programmes has been injected into the economy to offset the impact of Covid, but as the stimulus ends many firms will be struggling to remain liquid as payroll costs increase. The use of early payment systems where a small discount is applied to the suppliers’ invoice for settlement in under 10 days and FreePay whereby small businesses can get early payment with no discount applied, can help inject vital cash flow into business supply chains.
“Early payment schemes are widely used by Local Authorities allowing them to support their local communities. The programmes have shown that paying early is highly beneficial for businesses, increasing employment, strengthening contractor/ supplier relationships, and allowing investment and innovation. There is no reason to keep using outdated payment practices when new solutions could provide real benefits to the UK’s post-Covid economy.” concluded Mr Jackson.