North East firms had more than 222,000 unpaid invoices on their books in May that had gone past dates they should have paid them – and the number is steadily rising.
Latest analysis by insolvency and restructuring trade body R3 of data provided by CreditSafe showed that 13,310 North East firms had failed to clear 222,559 invoices by the time they were due.
It marks the fourth consecutive month that the number of outstanding invoices with North East firms has increased, with the figure rising by around 3% in the last three months.
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The R3 data also shows there were 1,509 new businesses set up in the North East during May, a rise of almost 200 from April’s figure of 1,321 - but the number of insolvency-related activities in the region, which includes liquidator appointments, administrator appointments and creditors’ meetings, rocketed by more than 40% between April and May.
R3 North East chair Chris Ferguson, who is head of recovery & insolvency at Gosforth-based RMT Accountants & Business Advisors, said: “A great deal of work has gone into widening the adoption of good payment practices over the last few years, but the reality of the present economic situation may well be that many North East firms simply don’t have the resources to pay what they owe on time.
“Being unable to do so is one of the key indicators of business distress, while from a supplier perspective, struggling to get the money owed from customers is often a major contributory factor to the failure of many otherwise-viable businesses.
“With inflation now running at nine per cent and expected to keep rising, the cost of sourcing raw materials and then manufacturing and distributing products has soared this year, putting a huge strain on cashflow, while rising food, fuel and domestic energy prices are clearly having a negative impact on consumer spending patterns.
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“In these circumstances, maintaining control over cashflow has to be the absolute priority for business owners, while proactively engaging with your creditors and potentially agreeing payment plans is more likely to result in a better outcome for all parties than simply allowing the position to further deteriorate.”
He added: “Business owners who are concerned about their financial position should seek qualified expert advice to discuss the different options available to them to deal with their situation – and the sooner they do so, the more options they are likely to have to put things right.”