Business Recovery Specialists

Late Payments, Cash Flow Problems and Insolvencies

Here at Business Recovery Specialists, our aim is to support businesses that are experiencing difficulties to turn things around before insolvency strikes. Recognising early that there is a problem – whether that is caused by cash flow problems, creditor pressure, HMRC arrears or difficulties with funding and finance – is the first step to recovery. This article looks at how late payments, a major cause of cash flow problems, are a significant cause of insolvencies.

Over 20% of UK Corporate Insolvencies are caused by Late Payments

Some new research by the Midlands Branch of R3, the Association of Business Recovery Professionals (the trade body for the insolvency and restructuring profession) has shown that more than 23% of corporate insolvencies in the UK were caused by late payments from clients and/or customers. The insolvency of a supplier or customer was the main factor in 20% of company insolvencies.

These are high numbers and previous research by R3 shows that late payment is an on-going and persistent problem. In the first half of 2015, for example, those businesses in the UK that were victims of late payment saw 15% of their invoices paid late. Indeed, the same research showed that 49% of all UK businesses had invoices that were paid late by clients and customers.

Late payment occurs in all industry sectors. The research showed, however, that the construction industry was the sector that had the worst record for late payments.

What can be done when cash flow problems arise from late payment?

In our experience, things can go wrong very quickly when late payments start to bite. A business only has so long before late payments start to cause real cash flow problems, regardless of how good or ‘strong’ the business is. This is particularly true if a business has over stretched itself. This might be because of the need to fulfil a big new contract, or over reliance on one big customer, for example.

Government guidelines and various campaigns have made little difference to reduce the problem of late payment. Research by the Federation of Small Businesses in 2014 suggested that the amount owed in late payments was c.£41.5 billion. But the question is: what can be done to solve the problem and turn the business around?

It can be very difficult to take effective action on your own when late payments are already a problem. However there are things you can do. The sooner you talk to us, the more we can do to help. Just some of the things we can help with include:

  • We’ll act on your behalf to find out the reasons behind late payments
  • We will implement an effective debt collection programme for you
  • We’ll review your internal systems of invoicing, contracts and fulfilment of jobs. This will ensure there are no good reasons for the late payment of invoices
  • We will recommend and implement debt insurance if appropriate

What can be done to prevent future late payments?

Moving forwards and minimising the problem of late payment recurring in the future, we can also help by:

  • Checking the credit-worthiness and solvency of potential new clients and customers
  • Advising on the quality and legal status of your business’s terms and conditions
  • Advising on the suitability of setting up an invoice factoring or invoice discounting facility

Contact us if your business is suffering with late payments

The sooner you contact us or call us on 0333 222 8065, the more our experienced team of Business Recovery Specialists can do to help your business recover from cash flow problems and other consequences of late payments.