Accountants: Don’t forget to ask WHO your clients are working for

December 3rd, 2018

“Great news! We have just landed two blue-chip accounts from absolutely nowhere!”. Lawrie Driver was not normally so ebullient when arriving at his accountants to discuss his company’s quarterly management accounts, but it had been a good day.

Gray Columns, the steadfast senior partner at Dubble, Entry and Heidit, perused the MD of Liquid Logistics over his half-moon spectacles. “Blue chip?”, he enquired. “Absolutely!” enthused his client: “Carlsberg Supply Company and Coca-Cola – signed them up this morning!”

“Oh”. Gray’s already mournful expression fell even further: “I’m very sorry to hear that”. Something in his tone stopped Lawrie from revealing that he had just taken out the lease on a huge new warehouse in Leeds where he was about to create his northern transport hub. “Why do you say that?”, he asked, deflated.

“Because Carlsberg Supply Company UK Ltd and Coca-Cola European Partners plc are among the worst payers in the UK”, said the well-informed accountant, throwing a list of the top 35 offending late payers across the desk. “No wonder they came from out of nowhere – their current transport partners have probably gone bust!”……

Well, we will leave our logistics entrepreneur and his accountant to sort that one out but although my characters above are fictitious (honestly) the list is not (seriously). You can see it  here and there are also some real world examples of the problems caused to small businesses by late payment of invoices.  You may be surprised to see various forms of “Ernst & Young…” on the list.

Once you have read that, take a look at the latest insolvency statistics for Quarter 3 (July to September) 2018 here. They reveal that my forecast last year that we were heading for darker days was, I’m sorry to say, accurate.

It is the underlying rate of company insolvencies that is the worrying aspect. The total underlying company insolvencies increased by 8.9% compared to Q2. When compared to the same quarter last year, the underlying number of company insolvencies increased by 19.3%.

A total of 4,308 companies entered insolvency in Q3 2018, consisting of 3,083 creditors’ voluntary liquidations (71.6% of all insolvencies), 741 compulsory liquidations (17.2%) and 484 other insolvencies (11.2%).

The underlying number of CVLs was an increase of 20.7% on Q2 2018, and the highest quarterly level since Q1 2012. 

Now, I am not saying that there is a direct read-across from the list of late-payers to the rise in corporate insolvency. But when you consider that UK SMEs are owed £44.6 billion in late invoice payments then I have to consider that late payment of invoices is a significant factor.

So you may like to direct your clients’ attention to the list of late paying companies to ensure that they don’t go down the same road as Lawrie Driver. And clients who have late paying companies on their books should think about having an active policy to replace them with customers who pay in a more timely manner.

If those late payments are causing problems – tackle them early.  We offer a Financial and Options Review (FOR) service which will health check your business and provide a fast, independent review of what consequences those late payments may have on your business.  If you have any concerns, contact us.