Rising insolvencies emphasise need for tight credit control

The number of companies entering insolvency in England and Wales rose to more than 17,000 last year, according to research by the trade body R3.

That was an increase of 2.5% compared with 2016.

Duncan Swift, deputy vice-president of insolvency and restructuring trade body R3, said: “The slight rise in corporate insolvencies across 2017 as a whole is a reflection of the difficult year that firms in England and Wales have been through.

“Inflation has eaten into many firms’ margins thanks to rising input costs on the one hand, and with customers proving somewhat reluctant to stomach higher prices on the other. Businesses have faced additional headwinds in 2017 with business rates changes, an increase in the National Living Wage, and the final stages of the pensions auto-enrolment roll-out.

“Intense competition and discounting in the run-up to Christmas has been another factor to add in to the mix in the last three months, although if there is an insolvency impact of poor pre-Christmas trading for retailers, it will be seen in the next quarter’s figures – as will any knock-on effect of Carillion’s liquidation on its suppliers and sub-contractors.”

The figures show that businesses need to ensure that their customers don’t fall behind in paying their invoices. If they become insolvent and default, they can jeopardise the viability of their suppliers.

It’s important to take prompt action to ensure payment before customers get into difficulty. A letter from a solicitor is usually enough to ensure payment; if not, there are other legal avenues available up to and including court action.

Please contact Neil O’Callaghan if you would like more information about the issues raised in this article or any aspect of debt collection and credit control.