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The Know-it Blog

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The Know-it team

Dec 29, 2020

500,000 UK Businesses At Risk of Going Bust In Weeks

500,000 UK Businesses At Risk of Going Bust In Weeks

The Federation of Small Businesses (FSB) has warned that 500,000 businesses are at risk of going under in just a matter of weeks.

Inflation and the soaring costs of goods, materials and energy are having a colossal impact on the cashflow of businesses up and down the country, and we’re yet to see the effect of the surge in interest rates.

A survey of business sentiment, the Barclays SME Barometer, reports that 75% of SMEs are worried about the long-term impact of the cost-of-living crisis.

The crisis we find ourselves in shows no sign of easing anytime quickly, so we must dig in and do what we can to make the most of this tough situation. Xero’s Global Update indicates that whilst businesses are making more sales, sales growth is slowing. But even with sales growing, inflation is resulting in firms having less purchasing power.

Inflation is currently at its highest level in more than 40 years and the Bank of England has warned of a recession. Inflation could even rise to double digits by the end of the year, making the economy even more perilous.

The FSB have previously reported that 50,000 businesses fail each year because of late payments, now 10x the number of companies are on the brink of going under. If you have overdue invoices, it’s time to act, urgently!

Boosting cashflow during tough times

Having a healthy cashflow is important during a downturn in the market or when costs increase, so you need to take every opportunity to find ways to give your cash reserves a boost.

Find cash hidden in unpaid invoices

One of the quickest ways of collecting more cash is to find and chase the cash trapped in your unpaid invoices. You’ve already done the hard part of securing a sale, now you need to make sure you’re paid. However, just 17% of SMEs admit they follow up with less than a quarter of late payments!`

Businesses are currently chasing overdue invoices worth £61 billion so you are not alone. We’re in the midst of a late payment crisis that shows no signs of easing anytime soon. The FSB found 61% of SMEs reporting invoices not being paid on time in Q1 2022, and 26% of these businesses say late payments are occurring much more frequently.

So why are businesses hesitant to chase their unpaid invoices? It’s been reported almost four in ten SME decision makers say they feel awkward chasing customers for late payments and huge 73% say they would be willing to forgo up to 10% of their annual revenue in order to dodge chasing their customers for payment!

Chase-it eliminates the need for confrontation by automatically chasing your overdue invoices by email, letter and SMS!

Better understand your customers to avoid making poor credit decisions

The very first step in a sound credit control process is checking the creditworthiness of your customers. A good credit check will show the payment behaviour of a company and therefore how likely they are to make payment on time or default.

Company credit checks help mitigate the risk of late payment and avoid cashflow worries by allowing you to only do business with companies that are highly likely to pay on time and offer credit limits suitable to their situation.

Check-it brings in company and credit intelligence from multiple data sources into one easy-to-read dashboard. Data from Graydon, Companies House, The Gazette and Unsecured Creditor Claims provide a complete picture of the companies you do business with, helping you avoid any potential pitfalls to your cashflow.

Insolvencies are on the rise – act now

£5.8 billion is lost every year due to liquidations with administrations set to rise by 33% this year. If you have overdue invoices, it’s vitally important that you act quickly to recover what you’re owed, or else you run the risk of losing out on what you’re owed.

Company insolvencies have soared 168% this year and creditor voluntary liquidations (CVLs) accounted for 87% of these insolvencies. In fact, CVLs reached their highest quarterly number in over 60 years this year.

The credit cycle can be vicious, one big insolvency in an industry will cause a ripple of defaults, meaning a huge amount of suppliers will lose out on cash they’re owed, which will then have a knock-on effect on their own suppliers.  

Unsecured Creditor Claims is a feature within Check-it that allows you see losses suffered by a business as a result of their customers going into liquidation or administration. This data isn’t provided in company credit reports so incorporating this intelligence with credit data from Graydon and company notices from The Gazette gives you deeper insight to better understand your customer and mitigate credit risk.

Automating your cashflow to boost cashflow

Keeping your cashflow in good shape is critical with so many businesses in financial stress and insolvencies going through the roof.

Know-it automates a full end-to-end credit control process, so you don’t need to worry about being paid on time.

Try Know-it free for 30 days and get a free company credit report! We don’t even ask for credit card details until your free trial expires.

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