Fresh warning over ‘catastrophic’ effects of late payments on small firms

0 Ken Pattullo, managing partner at Begbies Traynor Almost 115,000 British businesses waited an average of 57 days for payment last year, with more than 1,000 of these entering insolvency as a result, new research suggests.

The data, gathered by insolvency specialist Begbies Traynor from more than one million debtor day reports since 2011, aims to highlight how late payments can be a contributing factor to insolvency for small and mediumsized enterprises (SMES).

It revealed that 34 per cent of the 1,000 companies entering insolvency in 2018 had debtor days in excess of 57 days, while 15 per cent waited for longer than 86 days to receive payments.

The study claimed the support services sector is likely to be hit hardest, with almost 35,000 firms reporting debtor days in 2018, while utilities companies experienced a “worrying” 102 per cent rise in late payments, with reports climbing to 1,838.

It added that the continued growth of debtor days, with some sectors seeing an increase of up to 9 per cent, was a clear cause for concern.

The findings prompted fresh alerts for action to combat the issue, with Ken Pattullo, managing partner at Begbies Traynor in Scotland, warning over the “catastrophic” effects late payments can have on SMES and the wider UK economy.

He said: “The worrying growth of late payments must be addressed if we are to help businesses, and the UK economy, grow. Otherwise, the knock-on effects will spiral out of control.

“If this form of bad faith trading is allowed to continue then more businesses in Scotland will inevitably go to the wall.

“It is simply not sustainable for suppliers to take the hit when payment is not made on time – even businesses with large financial resources and contingency plans will suffer.”