Late payment scourge raises risk of company insolvency

Published on May 21, 2015 by Crawfords Accounting

The UK’s company insolvency rate is being driven higher by an ongoing scourge of late payment, according to figures from business recovery trade body R3.

In the past six months, half of all businesses surveyed by R3 have faced late payment on at least one invoice; the average victim saw 15% of their invoices go overdue; and a fifth of all company insolvency can be linked with late payments.

R3 vice-president Andrew Tate said: “Businesses know how much it costs others to chase down debts, and feel they can still get away with it.

“When a business enters insolvency, customers can see this as an opportunity to further delay payments or avoid payment altogether.”

As is often the case, sole traders are being treated most poorly, with an average of 17.3% of their invoices being paid late, compared with 12.3% of invoices owed to firms with more than 250 employees.

Mr Tate added that, for smaller companies, “the consequences of late payments are magnified” as even a single invoice not paid on time can have significant effects on a small firm’s cash flow.

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