2019 – Why so many businesses failed
2019 proved to be a tough year for many businesses, with research showing that the combined turnover of companies that went bust was around 1.2billion. With firms going under, this left many subcontractors and suppliers with huge losses unlikely to be recovered, leading to potentially even more businesses failing. So why did so many businesses […]
2019 proved to be a tough year for many businesses, with research showing that the combined turnover of companies that went bust was around 1.2billion. With firms going under, this left many subcontractors and suppliers with huge losses unlikely to be recovered, leading to potentially even more businesses failing.
So why did so many businesses fall into administration?
Cash flow problems
One of the leading causes of these failures appears to come from lack of cash flow. Today companies are finding it more and more difficult to lend money from banks, and for many businesses, issues that caused project delays stretched cash reserves, making it harder to cover overhead costs, especially for growing companies. Construction businesses have to pay their labour and their suppliers on time and if they’re not being paid quickly by clients or the contractors employing them, they can hit a cashflow problem meaning they can’t sustain the business because the money owed isn’t coming through.
By the end of 2019, over 63,000 construction companies were flagged as being in a precarious position and considered to be on the way to being in further financial danger; uncertainty over what happens next politically, and what that means for businesses here, meant that a lot of companies scaled back plans and put developments on hold. ONS figures also pointed to the fact the sector is witnessing material input costs rising at their fastest rate since July 2011. Begbies Traynor regional managing partner Julie Palmer says that the sector is “by no means out of hot water yet, many had taken out debt in order to ride out Brexit deadline after Brexit deadline, and the truth will now come to light as to whether that debt is sustainable, and the sector can return to a healthier, more stable time.” Some company’s potential clients also delayed their decision-making process or introduced new tariffs because of Brexit.
Late payments are a huge problem for many businesses, making cash flow problems even harder. The vast supply chains that operate in the sector can make getting paid an even greater challenge for businesses that might already be in trouble.
A survey by BACS found that thirty-nine per cent of SME’s are spending up to four hours a week chasing late payers. What could you be doing with that time instead?
The administrative burden of debt recovery involves staff time, internal tracking systems, postage and phone expenses. Not to mention legal expenses if it gets that far.
We offer services that enable you to concentrate on the more important aspects of running your business. Let our specialist debt management teams succeed in recovering all sizes of debts by contacting us on 01517076061, or getting in touch via our website https://www.danielssilverman.co.uk/