The Association of Business Recovery Professionals (R3), the industry body for insolvency practitioners, has revealed the impact late payment it having on the UK’s business community. A survey of their members has revealed that 47% had experienced a business going under where late payment was the primary (or a major) factor.
The research highlights the problems within the construction sector, which has “by the far the worst record” for credit control. Three in five insolvency experts believe late payments to be the biggest problem in the construction sector, which accounted for 20% of all business liquidations in 2012.
For freelancers and contractors late payment remains a troubling issue. Often at the bottom of the supply chain, one-person businesses frequently experience late payments from larger clients, and are often subjected to onerous payment terms.
R3’s President, Liz Bingham, said of the findings:
“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 construction sector is notorious amongst insolvency practitioners for its late payment problems, which are almost endemic to the sector. Businesses in the sector are also particularly vulnerable to insolvency. Almost every quarter, the construction sector sees the highest number of liquidations.”
Photo by Alan Levine