Late payment blamed for one-in-five small business insolvencies
22nd August 2016 | News
One-in-five small businesses collapse due to customers who delay their payment for goods and services, according to new research from trade body, R3.
The survey of the UK’s insolvency profession found that late payment was a primary or major cause of almost a quarter (23 per cent) of business insolvencies in the last 12 months, with the failure of a supplier or customer a primary or major factor in 20 per cent of cases.
Andrew Tate, president, R3, said: “A business can have a great product and great staff, but if it doesn’t get paid for what it sells, or if it is over-reliant on one supplier or customer, things can go wrong very quickly.”
The Insolvency Service states there have been 15,958 insolvencies in the last 12 months, and Mr Tate believes that despite the best efforts of the then Business Secretary, Sajid Javid, any Government initiatives have so far proved fruitless in tackling the issue.
“Unfortunately, Government promises and other initiatives don’t appear to have yet made any real impact,” added Tate.
“The failure of one company can have a serious knock-on effect. Both late payment and the domino effect have been identified as leading causes of insolvency by the profession, so more needs to be done.”
In addition, another new study by mobile payments firm, Paym, found that self-employed traders are losing £2,472 per year on average due to late and delayed payments or underpayment.
Three-in-ten (30 per cent) UK sole traders – amount to almost a million (990,000) businesses – have been forced to write-off a payment in 2016, compared with 23 per cent of those surveyed in 2015.
The figures showed the problem was most prevalent in the south west of England, where more than a third (37 per cent) of sole traders surveyed admitting they have given up on money owed by customers.
Simon McVicker, director of policy, The Association of Independent Professionals and the Self-Employed (IPSE), said: “Almost three-quarters of the disputes the self-employed have with clients are because of late payment.
“The Government must now get on with it and appoint a small business commissioner of stature.
“We need a strong figure who can spearhead better payment culture [for the self-employed].”