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Late payments a cause for concern 11 April 2014

Late payments by customers for goods and services are responsible for 20% of insolvency events, according to research from trade body R3.

A ComRes survey of R3 members found late payments were a major factor in one in five insolvencies.

The survey also found 47% of corporate insolvency practitioners had “seen at least one instance of late payment” being a primary or major factor in a corporate failure in the last 12 months.

R3 president, Liz Bingam, said: “Even if a business has a great business model and great products and services, it won’t actually be profitable or successful until it gets paid for what it sells. Late payment is a threat that businesses need to take very seriously indeed.”

“The late payment problem can have significant knock-on effects within the economy too. The failure of one company can lead to even more unpaid bills and financial problems for others.”

The construction sector was identified as the worst affected, with 59% of corporate IPs saying the market had the worst track record for paying bills on time.

Bingham added: “The construction sector is notorious amongst insolvency practitioners for its late payment problems, which are almost endemic to the sector. Businesses in the sector are also particularly vulnerable to insolvency. Almost every quarter, the construction sector sees the highest number of liquidations.”

Some 5% of corporate insolvency practitioners identified the wholesale and retail sectors as the worst offenders on late payment. Manufacturing, the public sector, and hotels and restaurants were each identified as the worst late-payers by 3% of corporate insolvency practitioners.

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