Almost 115,000 businesses waited an average of 57 days for payment in 2018 with more than 1,000 of these subsequently entering insolvency as a result, according to data from Begbies Traynor which highlights how late payments could be a significant factor in insolvency, reports Accountancy Daily.
The data, which was gathered from more than one million debtor day reports since 2011, also revealed that of those 1,000 businesses entering insolvency during 2018, a third (34%) had debtor days in excess of 57 days and 15% for longer than 86 days.
During 2018, media companies were made to wait the longest for payment with an average of 69 debtor days.
Over the period from 2011 to 2018, there has been continued growth in the length of debtor days. This includes a 9% increase in the telecommunication and information technology sector from 62 to 68 days, and a 5% increase in travel and tourism, from 46 to 48 days; general retail (up from 41 to 43 days) and media (increasing from 66 to 69 days).
Julie Palmer, partner at Begbies Traynor, said: ‘In our work we regularly encounter the catastrophic effects of late payments, particularly on SMEs. The worrying growth of late payments must be addressed if we are to help businesses and the UK economy grow.
‘Otherwise, the knock-on effects will spiral out of control and this trend of late payment will constrict, squeeze and suffocate growing businesses. Even the largest companies are not immune from the impact of late payments as this practice impairs cashflow.’
The data also revealed that 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 sharp increase of 102% from 912 to 1,838 reports of late payment.
Palmer said: ‘If this form of bad faith trading is allowed to continue then more businesses will inevitably go to the wall. It is simply not sustainable for suppliers to take the hit when payment is not made on time – even businesses with large financial resources and contingency plans will suffer.