Businesses have been urged to 'get tough' on late payment, after a new report revealed the number of insolvencies has rocketed since 2007.
The figures, by accountancy firm Deloitte, showed the number of businesses going into administration has risen by almost 54%, from 557 in the last quarter of 2007 to 858 in the first three months of 2008.
Late payments are also on the rise. Research by the Banker's Automated Clearing Services (Bacs) found that more than £18.5bn is owed in outstanding payments to small businesses - a leap of £2.6bn in the last year.
The survey also found that the average owed to a small business at any one time is £30,000 - a figure which Bacs said was alarming, considering almost a third of businesses said they would go bust if faced with overdue invoices of £20,000.
Duncan McAllister, a partner at law firm Mace & Jones, said small businesses need to ensure their credit control procedures are robust to 'weather the credit crunch crisis'.
"Late payment should not be tolerated and can be tackled with an effective credit control system," he said.
"Too many businesses are paying late to sustain their own cash flow and undermining their suppliers in the process. We advise businesses large and small to 'get tough' on this practice.
"That means thorough management, including credit checks on new customers and even existing customers, offering incentives such as discounts for prompt payment, and making customers aware of their obligation to pay with prompt invoices," he said.
© Crimson Business Ltd. 2008
