With the number of registered company insolvencies at 1,685 and 183 compulsory liquidations in April 2023 – nearly twice the number in April 2022 – the pressure on UK SME cashflow remains very real. This is according to Lynne Darcey Quigley, Founder & CEO of Know-it.

“The headline figure issued by the Insolvency Service this week for April appears to indicate a 15% drop in the number of insolvencies, but the reality is these figures remain considerably higher than pre-pandemic levels and also during a period of considerable government support,” stated Lynne Darcey Quigley.

“But as ever the devil is in the detail and the fact that compulsory liquidations have doubled year-on-year, paints a very different picture, representing what it does as a result of an increase in winding-up petitions presented by HMRC.”

“The impact of the value chain of company failures is stark. Failure to make payments on time is the leading cause of business failure. Our goal is to elevate the social conscience of larger businesses that don’t pay on time and unite small business owners in tackling this issue. A business that is concerned about late payments should take action by implementing an end-to-end credit management process,” continued Darcey Quigley.

Interruption of cashflow can be a result of delayed payments that negatively impact a business’ income and ability to trade effectively. Some businesses may be unable to hire new employees or invest back into their business due to invoices not being paid on time. Worst-case scenarios may lead to the business closing its doors. Although delaying payments by clients and customers is not new to businesses, two out of five (40 percent) SMEs report that they are more likely to see late payments following the pandemic.

According to The Insolvency Service, of the 1,685 registered company insolvencies in April 2023:

• 183 were compulsory liquidations, which is almost twice the number in April 2022;
• 12 were CVAs, which is 20% higher than April 2022;
• There were 122 administrations, which is 8% higher than April 2022;
• There were 1,368 CVLs, which is 23% lower than in April 2022;

“An economy that is constantly plagued with late payments will hinder its growth, and hard-working business owners will be thrown into a never-ending cycle of uncertainty. The stresses of chasing late payments should never be a challenge facing SMEs in Scotland and the UK, however the problem is only getting worse as these latest figures illustrate.

“SMEs are particularly vulnerable and have been significantly impacted by the crisis, subject to extended payment terms by big corporations. As we have seen from the data, businesses are left with little choice but to carry on and work with businesses deemed bad payers, often to their own detriment. To avoid organisations continuing in this vicious cycle it’s imperative business leaders are made aware of the tools and resources available to them, which can mitigate credit risk, reduce debtor days and increase cashflow,” concluded Darcey Quigley.

This article was first published by Fintech Finance.