Problems with late payments are pushing many struggling small businesses towards serious cash flow issues and potentially liquidation.
That’s according to the government-appointed small business commissioner Liz Barclay, who has been seeking to emphasise to larger companies just how important it can be for them to pay their smaller suppliers on time.
Ms Barclay has insisted that reducing the extent to which companies pay their suppliers late could go a long way towards stemming the flow of businesses currently failing across the UK.
With the British economy heading for recession and financial pressures mounting on small firms, rates of voluntary liquidation have been on the rise in recent months.
For a lot of businesses across industries, the issue of late payments is a fundamental part of the picture and often a key reason why companies enter liquidation when they do.
Ms Barclay has made the case that the prompt payment of invoices should be considered by larger businesses to be part of their ‘environmental, social and governance’ responsibilities.
“The way you treat your small suppliers is indicative of how you treat your employees and it’s indicative of your reputation within the community,” she told the Institute of Chartered Accountants for England and Wales recently.
“Boards keep saying it’s an operational issue, but it’s actually a strategic issue and a reputational issue,” she added.
Earlier this year, the Federation of Small Businesses (FSB) warned that as many as 400,000 small firms could go into liquidation or otherwise out of business in the UK over the course of 2022, partly because of late payment issues.
Ms Barclay has said she agrees that roughly that many businesses could indeed fail this year but she suggested in fact the FSB’s figure could be “a conservative estimate”.
The total number of corporate insolvency cases recorded across England and Wales during August this year was up by 43.4 per cent compared to the same figure for August 2021.
Of those corporate insolvency cases, a sizable majority were Creditors’ Voluntary Liquidations (CVLs) which involve company directors taking their businesses into liquidation voluntarily while they still have the option.
