A new report from insolvency trade body R3 has revealed the damage done to small firms by customers making late payments for goods and services.
According to their most recent survey of the insolvency profession, late payment was the primary cause in 23 per cent of insolvencies during the last 12 months, while the closure of a supplier or customer was the major factor in 20 per cent of cases.
According to the Insolvency Service there were 15,958 corporate insolvencies in the past 12 months, meaning that a total of 3,670 businesses shut their door as the result of customers paying late.
A separate study from mobile payments firm, Paym, has shown that Britain’s 3.3 million sole traders lose around £8.1 billion a year from late, delayed or underpaid payments – averaging £2,472 per business.
Andrew Tate, R3’s President, 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 problem of late payments has worsened since 2014, when a previous study found that late payment was the primary or major factor in 20 per cent of corporate insolvencies – indicating a three per cent increase during the last two years.
In May last year, former Business Secretary Sajid Javid, announced government plans for a small business commissioner to tackle late payments, but the future of these plans are now uncertain following his departure from the department.
Tate said: “Unfortunately, government promises and other initiatives don’t appear to have yet made any real impact.”
“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.”
Link: R3 Report