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Late payment causes 20% of insolvencies, says R3

Late payment by customers for goods and services is a primary or major factor in one-in-five corporate insolvencies, says R3, the insolvency trade body.

A ComRes survey of R3 members also found that 47% of corporate insolvency practitioners had seen at least one instance of late payment being a primary or major factor in a business’ failure in the last year.

Liz Bingham, R3’s president, says: “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.”

Insolvency practitioners say that the construction sector has by the far the worst record on late payment.

59% of corporate insolvency practitioners said that the construction sector had the worst track record for paying bills on time. 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.

Liz Bingham adds: “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.

“A high number of insolvencies and a late payment problem aren’t a coincidence. Action on late payment would result in a healthier construction sector.”

In 2012, one-in-five liquidated companies in England & Wales were in the construction sector.

(Source – R3 Press Release)

21 year holiday from being directors for travel firm owners

A mother and son, directors of a coach travel firm based in Bradford, have been disqualified for a combined 21 years from acting as directors for failing to protect customer money paid up-front for holidays and travel.

Following an investigation by the Insolvency Service, they gave undertakings to the Secretary of State for Business Innovation & Skills not to manage or control a limited company for a period of 11 years and 10 years respectively, effective from 22 April 2014. An Insolvency Service investigator stated “In this case, a significant number of elderly customers have been left out of pocket thanks to their disregard of protective legislation and it is appropriate that their disqualification is for a significant period of time.”

The investigation found that when the company was placed into liquidation in June 2012, there were 653 customers who had paid up front and lost a total of almost £220,000; the vast majority of these customers being pensioners. Customers also lost out as the company, having had its credit/ debit card facility withdrawn in late 2011, asked customers to pay by cheque or in cash.

 Originally reported by The Insolvency Service 14 April 2014