Delayed payments put more than 1,000 UK firms out of business last year, according to insolvency specialist Begbies Traynor.
The company, using data collected in the UK from debtor day information from 2011 onwards, found that 34% of the businesses entering insolvency had debtor days in excess of 57 days, and 15% of the businesses had debtor days longer than 86 days.
It also said almost 115,000 businesses waited an average of 57 days for payment in 2018.
In terms of industries, media companies had to wait the longest for payment with an average of 69 debtor days. The support services sector is most likely to be hit hard by late payments with almost 35,000 businesses reporting debtor days in the last year. Of these businesses 260 went under during 2018 reporting an average of 25 debtor days.
This was followed by the construction industry with almost 12,000 debtor days filed with an average 61 day wait for payment and 146 insolvencies. The utilities sector has also experienced a worrying increase of 102 per cent from 912 to 1,838 reports of late payment.
A spokesperson from Begbies Traynor told Chronicle Live that their data shows that "…year-on-year more businesses fall into significant financial distress, and with more than 100,000 businesses filing debtor days last year the suggested trend is that more difficult times are on the horizon. If this is true then UK businesses will need to improve the culture of late payments if our economy is become stronger and more resilient to change.”
The total amount owed to small businesses in late payments is £24,871 on any given day, according to cloud accounting software providers Xero.
These businesses struggle to raise capital needed for investments to grow the business. Xero calculates that £141 billion is tied up in late payments. The impact is not only felt by individual businesses. The UK economy is affected when SMEs struggle, as they account for close to 50% of GDP and 60% of the working population.
We are not sure if business owners are doing the right things in getting their payments on time, because at Riabu we believe they have the power to change how they approach receivables. To know more, sign up for our Udemy course on getting paid on time.
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