Problems with late invoice payments are still hitting one in eight regional firms, according to new research by insolvency and restructuring trade body R3.
The latest edition of R3’s regular Business Distress Index, which looks at measures of business success and distress across the UK, indicates that 12% of firms in the North East, Yorkshire and Humberside are currently owed payment on invoices that are more than 30 days past their due date.
And Neil Harrold, chair of R3 in the North East, is hoping the issues highlighted by the Carillion liquidation will act as a catalyst towards further action being taken to tackle poor business practices.
R3’s research, which is based on interviews with 500 nationally representative businesses by BDRC, also suggests that only 27% of regional firms are currently recording any of the five measures of growth that it monitors, compared to a national average of 55%.
Around one in five (19%) of firms in the region said they had seen a recent increase in their sales volumes, compared to a national average of 29%, while one in six (17%) had increased their profits, as opposed to more than a quarter (26%) across the UK.
The proportions of regional firms increasing their market share, investing in new equipment or expanding either geographically or by taking on new staff are all lower than their national averages, while around 22% of these businesses expect commercial activity to increase this year, compared to more than twice that number (46%) across the country.
The R3 research follows recent calls from the Federation of Small Businesses for the introduction of a strengthened Property Payment Code which would see FTSE 350 companies banned from applying for public sector contracts if they fail to pay contractors within agreed periods.
A 2016 R3 survey of the insolvency profession found that late payment for goods or services had been a primary or major cause of 23% of insolvencies in the preceding twelve months
Neil Harrold, who is also a partner with Hay & Kilner Law Firm, says: “The impact of late payment problems have been made more visible recently, and despite a great deal of effort in recent years to improve business practice around paying suppliers on time, there is clearly much more that needs to be done.
“R3 North East members work on business insolvencies where late payment has been a contributory factor every single day, and the stubbornly high proportion of cases where this is an important issue shows how much of an enduring problem it is.
“Late payments put unnecessary strain on the finances of businesses, and can stop them investing in new services, taking on new commercial opportunities or even having enough cash in the bank to cover their day-to-day costs, which can threaten their very viability.
“If payment terms are agreed with suppliers, then customers can have no legitimate reason not to stick to them, let alone still owe money thirty days after the initial deadline, and we would hope that the current focus on improving poor practices in this area will be reflected in improvements in our next Business Distress Index.
“Business owners need to stay on top of their invoice ledger and to tackle late payment issues as soon as they start to become apparent. The ‘domino effect’ of the failure of one firm impacting on others is well documented, but there are a range of options available to help proactive businesses stave off and move on from this sort of potential trouble.”