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Late payment causes 23% of company insolvencies

22 August 2016

The latest survey from Insolvency and Restructuring trade body, R3, reveals 23% of company insolvencies over the last 12 months were a result of late payment by clients and customers. 

Insolvent suppliers led to 20% of company failures, highlighting how the ‘domino effect’ can cause financial damage quickly. 

When payments are delayed or suppliers are in financial trouble, problems can escalate quickly so it is vital to ensure there is a system in place to prepare for problems in the supply chain as well as keep records and accounts up to date. 

There are ways to prevent late payment by improving the company’s debt collection system and vetting suppliers and clients before working with them. Read our top tips on debt collecting.

R3 President, Andrew Tate, commented, “Businesses must not be complacent when it comes to checking who they are trading with. If a business is not paid upfront it is essentially acting as a lender – albeit without the protections a secured lender enjoys. Keeping track of invoices and getting paid is vital.”

The construction industry was found to have the highest number of companies suffering from late paying clients. Quarterly insolvency statistics also show the industry to be struggling the most overall, due to the drastic fall in oil price.