Latest statistics from our Industry Watchdog report reveal that there could be a direct correlation with the level of risk a business holds to becoming insolvent with how long they take to pay bills.
It has long been acknowledged that cash is king, and the bottom line of a successful business is whether it is making money. Historically, if a business’s cash flow is unstable, the business could suffer and see a risk of insolvency, and according to our latest results based on the first quarter of 2018, money coming in and out of the business does have a direct link to whether or not that business is ranked as good or bad to do business with.
We found that the IT industry had the smallest amount of business in the ‘very high’ and ‘high risk’ banding on the Creditsafe system. It also had the most businesses (46%) in the ‘very low risk’ banding. Our research further states that the IT industry as a whole pay bills on average, 10 days beyond terms; the third quickest out of our core 11 industries analysed in the Creditsafe Watchdog Report.
Furthermore, the IT industry was also the second fastest industry to be paid, receiving payment for invoices on average 7 days beyond terms. With money coming in and out of the business fairly quickly, the industry is able to maintain a healthy cash flow and businesses are able to gain solidarity.
It is positive to see that 70% of businesses within the IT industry are classed as low risk; however are they good at paying all their bills? Our research shows the average invoice value for a company within the IT industry to issue is £2,871, which is the second largest amongst all our industries, and yet they are still the fastest to be paid. However, when it came to paying their own bills, they took 18 days beyond terms to pay bills over £20,000, and 13 days beyond terms to pay invoices between £100 and £500, being among the top three slowest paying industries within our core 11 for those amounts in Q1, 2018.
The slowest paying industry as a whole was utilities and waste management, paying their bills on average 12 days beyond terms. They were the slowest paying industry for invoices between £100 and £5,000 in the first quarter of the year, paying them between 13 and 18 days beyond terms. They were also the industry with the second highest amount of businesses (4%) in the ‘very high risk’ banding on the Creditsafe system. However, even though they were late paying their invoices, the statistics showed they did get paid more often than not; as the utilities industry had the second least amount of County Court Judgments (CCJs) issued to them in Q1, 2018 out of our core 11 industries; recording 208.
Every company will have their own structures and regulations of paying invoices, so our advice would be to do your due diligence before agreeing to do business with a company. Ask about their payment processes, check their company credit report and see how other suppliers have said they pay their bills. Knowing whom you are dealing with is key to avoid the risk of insolvency.