More than a third of all UK businesses are expecting an increase in payment delays and payment defaults over the next six months, according to trade credit insurer Atradius.
Atradius’ recent Payment Practices Barometer revealed that nearly a third (29 percent) of all invoices issued by British respondents were paid after the due date, with liquidity constraints cited as the most common reason for payment delays, and of the total value of money owed, four percent was written off as uncollectable. This combined with the news that major business groups such as the British Chamber of Commerce are slashing growth forecasts for the year ahead means that businesses are struggling in a difficult market.
The report reveals that 32 percent of all businesses in the UK are expecting an increase in trade credit risk and, as a result, British firms are now searching for new ways to reduce payment delays and payment defaults.
UK firms are most likely to incentivise customers to pay their invoices early (40 percent) when compared to their foreign counterparts (33 percent), in an effort to recoup payments on time, and more than half (54 percent) of British businesses are expecting to deal more in cash sales to guarantee payment.
In addition, more than 40 percent of UK respondents reported that they will increase or begin to use other credit management tools such as requesting secure forms of payment, credit checks, monitoring credit risks and regular payment reminders. However, Atradius warns that these solutions can be problematic as they offer no recompense for non-payments.
Alun Sweeney, Director of Atradius UK and Ireland, says: “Businesses need to be more astute in protecting themselves from the risks; by using tools such as frequent creditworthiness checks of customers, payment reminders and insuring the business, so that each transaction is protected against losses, even when faced with the risk of insolvencies and payment defaults.”