During 2011 small consultant engineering companies reported that they faced an average collection period on payments due from clients of 76 days. One fifth of small firms participating in ACE's Benchmarking Lite reported debtors amounting to more than 100 days' sales.
While the time that small firms wait is shorter than large firms (85 days), it is still significantly higher than the Government's stated desire to see bills paid within 10 days. 'In addition, with 17 per cent of firms running at a loss, and with margins falling across the sector, the length of time can cause small companies that often have limited reserves significant problems,' said ACE.
Nelson Ogunshakin OBE, chief executive of ACE, added: 'With increasing financial pressures facing client companies in the public and private sectors, small engineering companies are facing significant waits to be paid for the vital work that they do. This can cause significant risks for their business as cash flow proves tight and lending conditions remain difficult. We appreciate the government's commitment on this issue through long-standing measures such as the Fair Payment Charter with maximum 28 days on payment. However, we hope to see the principles behind this adopted more widely across the sector , if we are maintain a sustainable industry.'
Small firms also reported that their order books were significantly shorter than large firm order books in 2011. While large firms reported an average order book of 8.2 months work secured, companies with fewer than 50 staff had just 4.5 months of work ahead. This further increases the risks faced by firms going into 2012.
Click
here for more.
Meanwhile, an ACE study of consultancy and engineering firms with fewer than 50 staff has revealed that a small reduction in admin time can boost profits by 30 per cent.
The study looked at over 150 areas of data from small companies and found that typical firm fee earners spent 74 per cent of their time on fee earning work. If they could increase their billable time by just 10 minutes a day in place of admin work, the average company would generate 3 per cent extra revenue and average profits would rise by 30 per cent from their current level.
