What directors need to know about their rights
The findings from market researchers Critical Research also show that a further third of businesses surveyed were being paid over a month later than usual.
Conversely, 12% of these small businesses admitted that they themselves are withholding and delaying payments to suppliers in order to maintain enough time between sending and paying bills.
The coronavirus pandemic has also instituted another one – of bad debt.
Companies who replied have written off an average of £21,000 each. Over a quarter of respondents had clients who have failed to pay the full amount and just over a tenth report that some clients have refused to pay at all.
Supply chains have also been severely disrupted by the virus and its aftermath.
A fifth of companies have reported supply chain issues including temporary or permanent closure of their suppliers and a similar number admit that they are currently using debt in order to maintain their cash flow levels.
Other interesting findings include 14% lacking sufficient working capital to buy raw materials and fulfil new orders; 13% have turned down orders because of their inability to fulfil them and 32% candidly admit that social distancing measures in the workplace have reduced their capacity to pursue new business opportunities.
Ana Boata, head of macroeconomic research at Euler Hermes trade credit insurers called the situation an insolvency timebomb.
She said: “Even as economies emerge from lockdowns, we expect the bulk of insolvencies is still to come – largely between the end of 2020 and Q1 2021.
Late payments are a serious problem
We’ve previously written about insolvency predictions and forecasting what will happen to the economy in the short and medium term.
Two conclusions are immediately apparent.
The first is that predictions are not set in stone and may never come to pass. The second is that while predictions are just forecasts and guesses they are based on experience, evidence, behaviour models and previous examples – they are still our best estimates on what is likely to happen and the most pertinent course of action is to proceed based on the best information available at the time.
And the best information tells us that as soon as the temporary measures stopping creditor remedies including winding-up petitions and high court enforcement actions are all lifted and the Coronavirus Job Retention Scheme (CJRS) runs down then the number of businesses in acute financial difficulties will rise exponentially.
No matter what the future holds for you and your business, talking to an expert about what you can do to make it more secure is a prudent strategy.
We can conduct a thorough Business Viability Review to provide as accurate an assessment as possible on the businesses financial health for the next six to 12 months based on your actual financial forecasts.
Get in touch with us to arrange your free initial virtual consultation which can be held remotely at your convenience.
We can work with you on the areas you think you need most help with and advise on what you can do right now to make sure your business won’t be a statistic if predictions come true or even prove inadequate.