Invoice finance – A solution to cash flow issues for SMEs in the North East?

According to new research from Siemens Financial Services (SFS), North East manufacturing SMEs could unlock £849 million through the use of invoice finance.

Invoice finance is a system whereby a company invoices their customer, then up to 90 per cent of the approved invoice total is then advanced by the finance provider, with the remaining 10 per cent paid once the 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. It would also allow SMEs in the North East to tackle the issue of slow/late payment themselves.

The report, titled ‘Trapped Cash in the Manufacturing Sector – North East’, reveals that the North East has one of the highest proportions of SMEs suffering from cash flow issues.

On average, firms in the region are made to wait 40 days before they receive their money, three days more than the national average.

Manufacturing is an important part of the North East’s economy, accounting for 14.2 per cent of regional output.

The sector is also largely made up of SMEs, which operate within a complex supply chain involving firms across the UK and the world. As such, cash flow issues can put them at a disadvantage to international competitors.

Pulin Trivedi, invoice finance head of sales for the North East at Siemens Financial Services, said: “The North East represents a cornerstone of British manufacturing and it’s important that the region’s SMEs have the tools to grow.

“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.”