Late payments causing insolvencies among SMEs
Late payments are the cause of 20% of insolvencies of small to medium-sized enterprises (SMEs) according to a recent study.
SMEs can be vulnerable if their customers don’t pay them on time, with cash flow problems potentially leading to major problems such as being unable to pay staff or buy essential materials.
In a survey of R3 members carried out by ComRes, companies in the construction sector were named by 59% of corporate insolvency practitioners (IP) as the worst offenders for not paying their bills on time.
Nearly half the IPs surveyed also said they had seen a case of late payment being a key factor in a company insolvency in the last 12 months.
Liz Bingam, the president of R3, highlighted the issue as cause for concern: “Even if a business has a great business model and great products and services, it won’t actually be profitable or successful until it gets paid for what it sells. Late payment is a threat that businesses need to take very seriously indeed.
“The late payment problem can have significant knock-on effects within the economy too. The failure of one company can lead to even more unpaid bills and financial problems for others.”
The survey findings highlight the need for businesses to keep a tight rein on credit control.
Please contact Thomas Nolan if you would like help or advice about recovering debts from late payers.