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Companies accepting poor payment terms to stave off collapse

Nearly half of UK firms have accepted uncomfortable payment terms in order to avoid insolvency, a new report shows. 

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Credit management group Intrum highlighted the predicament firms are facing over invoices in its European Payment Report, which also depicts the negative financial disruption businesses now face due to the pandemic.

 

According to the report, late payment is hindering strategic growth initiatives in 51% of businesses. Some 80% of firms say they have accepted longer payment terms than they felt comfortable with and nearly half did so to avoid bankruptcy.

 

Some 46% of UK businesses predict the risk from debtors will rise over the next 12 months, which is up from 14% in 2019. Over two-thirds ranked a pan-European recession among their top challenges.

 

Intrum UK managing director, Eddie Nott, said: “Late payment is threatening the survival of the UK’s businesses. Lengthening payment terms, default and rising arrears mean firms must dedicate more time and resources to getting paid. With the economy and customers under increased stress, it is little wonder companies are cutting costs, reducing headcount and shying away from taking on debt.”

 

The report gathered data from 9,980 companies across 29 European countries covering 11 industry sectors. The survey was conducted during February and May 2020 (pre and during Covid-19).

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