Cash flow improves for food manufacturers

25-Jul-2012 - Last updated on 26-Jul-2012 at 07:13 GMT

Manufacturers are paying their bills more promptly

Cash flow for food manufacturers must be improving since they have significantly reduced the time it takes them to pay their bills, according to credit ratings firm Experian.

Experian’s latest report covering the second quarter of 2012 showed that food manufacturers reduced their average length of time to pay bills to 22.35 days in the second quarter of 2012, compared with 23.95 days in the first quarter and 25.98 days in the second quarter of 2011.

Max Firth, UK md for Experian’s Business Information Services division, said: “Historically, payment performance among food manufacturing firms has closely followed the national average.

“However, since Q3 2011, as the average payment performance improved across the UK, food manufacturing firms saw their payment performance improve at a slightly faster rate. This highlights that the average cash flow position of companies in the food manufacturing sector is getting better.”

Two days faster

The overall data across all businesses showed that on average they paid bills almost two days faster in 2012 compared to 2011.

In the second quarter of this year, firms were paying their overdue invoices on average 23.38 days after agreed terms, compared with 25.23 days during the same period in 2011 and 24.59 days during the previous quarter.

The research also showed that the biggest improvements came among larger firms. They have always taken longer to pay than smaller businesses, but the gap, which was 20 days in 2009, is now down to less than 12.

Firms with 50 to 100 and over 501 employees paid their bills nearly two days faster than in the second quarter of 2011, while firms with 101 to 500 employees paid nearly two-and-a-half days faster than in Q2 2011.

Lead by the larger firms

Firth said the overall improvement in payment times was being lead by the larger firms but he added: “There is, however, only so much improvement that can take place among these firms. The very nature of the way large businesses are structured – hundreds of suppliers, multi-sites, multi-departments, stringent processes – makes it impossible for them to pay as fast as their smaller more flexible counterparts.

“It is vital that smaller firms think about their collection strategies, and take on board some of the strategies employed by their larger counterparts to help ensure they get paid on time.

“This includes monitoring the payment performance of their customers to ensure early signs of deterioration are caught before it is too late.”