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During 2011 small engineering companies reported that they faced an average collection period on payments due from clients of 76 days. One fifth (20%) 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 ten days. In addition, with 17% 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.
Nelson Ogunshakin OBE, chief executive of ACE, said: "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.
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For media enquiries please contact Gavin Pearson (gpearson@acenet.co.uk) (020 7202 0255).
Notes to editors
Benchmarking Lite collected 150 items of data from 36 firms with fewer than 50 staff operating across the UK in the consultancy and engineering sector.
Following five years of successful benchmarking ACE in 2011 expanded this useful tool, offering it free to ACE members in the UK with a headcount of 50 or fewer.
ACE benchmarking is conducted in association with The Centre for Interfirm Comparison (CIFC) which has worked with ACE to design and operate the Benchmarking project for engineering and consultancy firms. Their significant experience and independence means that the ACE Benchmarking results are accurate and concise, providing an in depth analysis of companies performance.
For the full report please click here.
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