At the start of last month we wrote a blog that outlined the findings of a new WorldPay report. This stated that small businesses were owed billions of pounds a year as a result of late payments, with the vast majority of this being written off altogether.
The focus then was on how it could create cashflow problems for smaller businesses. Alas, the plot thickens; today the insolvency trade body R3 has revealed that late payments were at the heart of 20 per cent of insolvencies in the last year.
ComRes surveyed R3’s members and found that one in five corporate insolvencies had suffered from late payment for products or services. Furthermore, 47 per cent of corporate insolvency practioners said they had seen at least one occurrence of a late payment being a primary or major factor in a business failure in the past 12 months.
Every cloud has a silver lining, as the old cliché goes, and this is true in this instance; the insolvencies of small business that are unable to stay afloat by treading water long enough until payments are made in turn open the door to cash-rich business buyers to snap them up.
Essentially the point here is that many of these businesses are not failing because their products or services aren’t good enough or profitable, they are failing because they aren’t getting money in return for them. Unsurprisingly, even if you have a great product, giving it away and not getting paid for – at least not in the time frame required – is not a sustainable business model.
There is almost no company that has not had to deal with the ongoing issue of clients or customers not paying their dues promptly. While you ought to account for this as best you can, for the most tight-budgeted and cash-strapped of UK businesses every penny counts, so when a big deal yields no money in the short-term they can be left of pocket and insolvency looms.
For anyone with greater capital to be able to handle potential dry spells between payments, this does make for a great investment opportunity though. 
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