Insolvency experts have cautiously welcomed a fall in the number of North East businesses with late payments on their books – a key factor in many company failures – but says more must be done to tackle the issue.
The number of North East businesses with overdue invoices on their books has fallen for the third consecutive month, dropping from a peak of 12,303 companies in August to 12,141 in November. The figures have been uncovered through analysis by insolvency and restructuring trade body R3 of new data provided by CreditSafe into the regional firms still holding invoices that had gone past their agreed payment period.
The figure has dropped around 1.5% year-on-year lower than the 12,321 overdue invoices in November 2022. In all, regional business had 141,291 outstanding invoices on their books last month, 12.7% fewer than the 2023 high in February of 161,797, and 13.9% down on the 164,180 recorded the same time last year. R3’s research also showed that the 89 insolvency-related activities in the region November were 29% up on 69 insolvency-related activities in November 2022.
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The Government has introduced several reforms to the voluntary Prompt Payment Code in recent years, in efforts to address late payment problems. In last month’s Autumn Statement, chancellor Jeremy Hunt announced that, from next April, any company bidding for large Government contracts would have to show they paid their invoices within an average of 55 days.
Chris Ferguson, North East chair of R3 and a director and head of recovery & insolvency at Gosforth-based RMT Accountants & Business Advisors, said: “Late payment is one of the biggest bugbears facing North East business owners, and despite the Government’s efforts to address this, it still remains an enduring issue for far too many regional firms.
“Delayed payments are often a contributing factor in many business failures and can have a far wider impact than just on the distressed business itself. Customers failing to pay invoices on time can have a serious impact on a supplier’s cash flow too.
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“The slow fall we’ve seen through the autumn in the number of North East firms facing late payment problems is clearly a positive trend, but there are still many businesses suffering due to customers not paying their debts within their agreed payment terms. Being unable to pay your bills on time is an indicator of business
distress and should be a clear prompt for business owners to seek professional advice. Early intervention to identify and address underlying issues is critical to ensure good businesses can continue to operate.”