Half of businesses in the North East, Yorkshire and Humberside have been victims of late invoice payment in the last six months, according to research by insolvency trade body R3.
The latest round of the organisation’s Business Distress Index, which reports on the levels of growth and distress of companies across the UK, found that 50% of those in the region had seen creditors miss their invoice payment deadlines.
Over two fifths (43%) revealed that up to 10% of their invoices had been settled later than they should have been, with 5% saying this was this case with between 21% and 30% of the bills they had sent out.
Previous research by R3 has found late payment is a primary or major factor in one-in-five UK corporate insolvencies.
The latest figures come as The Journal approaches the eight-month mark with its Pay Fair campaign, which is calling on companies to sign the Business Ethics Pledge created by the North East Institute of Business Ethics.
According to the research, 49% of firms nationally had been hit by late payment in the last six months.
R3 also found that sole traders were the most likely to be hit, with those affected seeing an average of 17.3% of invoices being paid late in the last six months
The research found that 7% of sole traders said between 41-50% of their invoices had been paid late, compared to just 1% of companies employing over 250 people.
The latter category saw an average of 12.3% of invoices paid late.
Neil Harrold, vice chairman of R3 in the North East and a partner at Hay & Kilner Solicitors, said: “Late payment puts unnecessary strain on a business’ cash flow, increasing the risk of insolvency.
“Despite government guidelines and business campaigns, late payment still remains all too common - rogue businesses know how much it costs others to chase down debts, and feel they can still get away with it.
“When a business enters insolvency, customers can see this as an opportunity to further delay payments or avoid payment altogether.
“Doubts over cash flow caused by late payment can make it impossible to continue to trade a business in administration until a buyer is found.”
He added that it is the smallest companies that “bear the brunt of late payment” and who suffer greater consequences as a result, with even a single incident of late payment potentially having a significant impact.
Ted Salmon, regional chairman of the Federation of Small Businesses in the North East, said: “The weight of evidence showing the damage poor payment practices are having on the regional and national economies grows greater each day with the amount owed in late payments across the UK now at £41.5bn.
“Once again we find it is sole traders and smaller firms which are facing the brunt of late payments, and this is putting viable businesses at risk of closure.
“Addressing the UK’s poor payment culture – particularly among large companies towards their smaller suppliers – must be a top priority for any new government.
“Small businesses see progress on payment practices as a key benchmark of success for the new administration.”
To sign the NIBE ethics pledge, go to http://www.nibe.org.uk/ .