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Manufacturing suffers most from late payments

10 July 2013

Manufacturing suffers most from late payments

UK manufacturing firms are waiting longer to get paid by their buyers than any other industry sector, according to trade credit insurer Atradius.

The manufacturing sector waited on average 32.4 days for invoices to be paid in the first quarter of this year, and also experienced the highest rate (4%) of write offs on uncollectible debt during the same period.

But in a twist, Atradius found that 45.6% of UK manufacturing businesses chose to supply credit to establish long-term domestic trade relationships, and offered the longest payment terms for their B2B customers.

However those same firms were also most likely to incentivise customers to pay their invoices early in an effort to recoup payments on time.

In contrast to manufacturing, the financial sector had the lowest average wait for invoice payment at 19.3 days, Atradius found, as it concluded that all British businesses are expecting an increase in trade credit risk and as a result, are seeking new ways to reduce payment delays and defaults.

Alun Sweeney, director of Atradius UK & Ireland, said: “There is no doubt that manufacturing firms are finding the climate difficult to trade in.

“Unfortunately, this does not come as a surprise when almost half of all respondents in the manufacturing sector revealed that they are supplying products on credit and offering longer payment terms, despite the challenging economic climate faced by customers. The worry is that although these techniques may sustain business in the short term, cash flow issues could well impact their stability in the long-run.”

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