A leading figure in insolvency trade body R3 is supporting The Journal’s Pay Fair campaign in the hope of helping reduce the number of business insolvencies linked to late payment.
Neil Harrold, who is vice chairman of the organisation’s North East branch and a partner at Hay & Kilner Solicitors, said the adoption of prompt payment practices across the public and private sectors would help lower the number of companies in the region that are forced unnecessarily into financial difficulties, while also encouraging sustainable growth across the North East’s recovering economy.
In 2013-14, almost half of the insolvency practitioners that work on corporate insolvencies in the UK reported working on a case in which late payment was a major factor.
An R3 survey of the profession also showed late payment was a primary or major reason for around one in five corporate insolvencies.
Mr Harrold said: “Late payment is one of the more frustrating causes of business failure - it is avoidable, and often has a disproportionate impact on smaller businesses.
“Although insolvency processes and insolvency practitioners can often help businesses recover from financial difficulties, it would be better if otherwise viable firms’ futures were not put at risk in the first place.
“Controlling the growth opportunities that are increasingly available is one of the key challenges facing management teams as the economy emerges from a difficult period. This can present particular challenges around cash flow for businesses that try to run before they can walk.
“Delayed payments can create additional pressure in this situation where there’s no need for it to arise, and can stymie or even stop altogether the development of companies that might otherwise be creating and sustaining regional wealth and employment.”
Mr Harrold also highlighted the findings of a recent National Audit Office report that suggested Government policies on prompt payment were failing to create the desire effect of supporting cashflow among SMEs.
“The Government has been vocal about the importance of prompt payment and it is imperative it sets the example in practice,” he said.
“For many small businesses that work with the Government, action on prompt payment will be worth far more than words.”
R3 represents around 97% of the UK’s insolvency practitioners, promoting best practice for professionals working with financially troubled individuals and businesses.
Through the Pay Fair campaign, The Journal is encouraging North East companies of all sizes to take a responsible and ethical approach to paying firms within their supply chain.
We are asking firms to sign the Business Ethics Pledge created by the North East Institute of Business Ethics, thereby agreeing to join with others to discuss the value of business ethics and to work with each other to transform their working environments for the better.
For more information, see http://www.nibe.org.uk/