Late payments have taken over from insolvency as the greatest reason for UK claims notifications during the first quarters months of 2013, according to new figures from Coface UK.
The credit insurance firm has recommended that UK businesses “tighten their credit management procedures”, in order to address the risk posed by late payments.
Between January and the end of September 2013, Coface received claims notifications from approximately 590 of its UK credit insurance clients, of which 60% were made “because of a customer’s protracted default” and 40% because of “customer insolvency”.
During the same period the year previously, 33% of claims notifications received were the result of protracted default and 67% received were due to insolvency.
Andrew Share, director of information, claims and collections at Coface UK, said: “Our findings reflect the national trend, in that the number of company insolvencies in England and Wales, which altogether rising by 10.5% in Q2, continues to decline since its peak in 2009 and in Q3 was 2% lower than 2012 Q3.
“However, the level is still much higher than at the start of the financial crisis in 2008 and the current situation for companies remains fragile.
“Low interest rates and favourable credit conditions mean that businesses are able to survive, although many are just treading water unable to grow or invest. In this context it’s not actually surprising that the percentage of claim notifications made to Coface UK due to late payment has almost doubled; some companies are trying to hold on to their cash for as long as possible even though this can have damaging consequences for their suppliers.
“It is important that businesses have an effective credit management strategy in place to monitor their customers’ payment behaviour and limit their exposure to late-paying customers.”