The UK’s thriving creative industries are being undermined by late payments. Findings2 from business finance company MarketInvoice reveal that 48% of businesses in the creative industries were paid late in 2018.
Businesses that make up the creative industry are typically smaller companies (usually agencies and consultancies) that provide services to a range of sectors from TV and film to design and publishing. These smaller firms are typically beholden to lengthy payment terms meaning they must wait upwards of 90 days before their invoices are paid.
In 2018, a typical invoice worth £38,137 was being settled 13 days beyond payment terms leaving this vulnerable industry £1.1b out of pocket at any given time. Larger companies were more likely (51%) to pay the creative industries later than smaller businesses (41%). Whilst some companies settle their invoices on time, one in seven (14%) take more than 14 days beyond agreed terms to pay.
The number of invoices settled beyond 14 days of agreed terms has reduced between 2014 (23%) and 2018 (14%) but year-on-year changes in percentage of invoices paid late has significantly fluctuated. In 2014, 55% of invoices were paid late compared to 66% in 2015 and then down to 53% in 2016 before rising to 64% in 2017.
Phil Dean, Managing Director at creative agency Certain commented: “As a business that’s growing you inevitably become short of cash because you’ve got to fund that growth and clients aren’t always brilliant payers. In our world it’s not a problem doing the work, it’s actually getting paid.”
MarketInvoice have partnered with investors Creative England, publishers The Drum as well as trade and policy bodies the Creative Industries Federation and the British Interactive Media Association to support companies in the creative industries sector.
Caroline Norbury MBE, Chief Executive of Creative England, commented: “As a specialist creative industries investor, we work with creative businesses across the country every day. We know that lengthy payment delays can cause talented, profitable businesses to fold. Small, ambitious creative businesses make big upfront investments to deliver major projects for clients but often don’t have the financial reserves to cover long cash flow gaps. That’s a waste of talent and lost GVA for UK plc. MarketInvoice provides a valuable short-term finance option to help businesses survive and thrive, in this increasingly important economic sector.”
Anil Stocker, CEO at MarketInvoice said: “Landing a big project in the creative industries can be a breakthrough moment for most. Being hindered by long payment terms and, worse still late payments, can really derail these young businesses. MarketInvoice exists to support businesses’ cashflow. This enables companies to gear for growth, take advantage of new opportunities and fundamentally, achieve their ambitions.”
The terms of an invoice normally dictate a long payment period that can be up to 120 days, leaving businesses with a cash flow gap in the interim. With invoice financing, SMEs who sell goods or services to other businesses can upload or sync their invoices to MarketInvoice’s platform and sell them to investors, unlocking fast access to funding.