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Risky debt and insolvencies are rising in UK

The UK government has recently withdrawn support measures that were introduced to help businesses survive during the pandemic, and this has led to rising insolvencies. In September, about 1,446 companies went bankrupt, which is a 7.2% increase from the previous month, and a 56% increase compared to the same month last year.

Want to know more about this topic? Listen to RIABU's Simon Littlewood and Mark Laudi discuss this issue on our podcast, Be First In Line To Get Paid:

Begbies Traynor, a listed restricting company in UK, is seeing a higher number of inquiries from companies regarding the sale of assets before these businesses become insolvent. Euler Hermes, a trade credit insurer, also expects UK insolvencies at 17,100 in 2021 and 20,540 in 2022 in the UK.

The number of insolvent businesses may rise even further, because many companies that borrowed heavily are now unable to pay down their loans. Small and medium businesses (SMEs) definitely number among these troubled companies. A report by the Bank of England indicates that a third of small businesses carry 10 times more debt than cash in hand, and are at the risk of collapse.

Other obstacles are looming even as economic recovery seems to be gathering pace. These challenges include high energy and commodity prices, along with widespread supply chain disruption. Moreover, Nicky Fisher, the deputy vice-president of the insolvency trade body R3, thinks that consumers are now increasingly cautious about the state of the economy, their personal finances, and the increased cost of living and are more wary about spending their money.

In this landscape, it is more important than ever for small businesses to manage their cash flow with a high degree of discipline.

RIABU believes that receivables are the first and only possible route of cash inflow into your business. As such, processes must be put in place that prioritise the timely receipt of these receivables. These processes must include frequent communication with customers to resolve discrepancies, and this is especially important during the contract initiation period. Doing so will improve your Days Sales Outstanding (DSO), which in turn will improve your cash flows.

Get more tips on effective cash flow management from our book, Let The Cash Flow. To find out more about how RIABU helps small businesses get paid on time, visit RIABU.com

Topics

  • Business enterprise, General

Categories

  • cash flow
  • business owners
  • bankruptcy
  • accounts receivable
  • smes

Contacts

Mark Laudi

Press contact Managing Partner (+65) 6223 2249

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Want to know more about this topic? Listen to RIABU's Simon Littlewood and Mark Laudi