The effects of COVID-19 are becoming more and more evident with new headlines appearing almost every hour, covering bleak stories of job losses and industry giants collapsing. But, there are few headlines more startling than the outcome of the Begbies Traynor Group Red Flag Alert Research. Their latest findings for Q3 2020 show that 557,000 are in significant distress, an increase of 6% from Q2 2020.
What Do The Stats Say?
Within the 557,000 businesses in significant distress, 10 out of the 22 sectors analysed returned an increase over 10%. Unsurprisingly, this included bars and restaurants, construction and retail.
As a result of reduced court activity and the disallowing of winding up petitions for COVID-19 related debts, these figures are probably far lower than they could have been. With some of these restrictions and certain business aid being removed in December, it will be Q1 2021 before we might see a true reflection of the destruction caused by COVID-19 in the business landscape. Begbies Traynor is anticipating a flood of insolvencies, once the courts return to full capacity.
In Q3 2020, there was an increase of 7% of construction business falling into distress (72,402) and a year-on-year increase of 23% in the Real Estate (property) sector, the largest increase across all 22 sectors. The hospitality sector saw an increase of 10% from Q1 2020 figures and retail increased by 9%. It is worth remembering that Q3 2020 includes July, August and September, a time when the nation was coming out of lockdown and restrictions had been eased. None of these figures will be helped by a reintroduction of a nationwide lockdown during Q4 2020.
These latest figures follow six previous quarters of rising financial distress, demonstrating that COVID-19 has, of course, had an unprecedented impact on businesses financial positions but the trends were already beginning to show long before the pandemic took hold. With recent research from YouGov that discovered 1 in 6 invoices are paid late, it is easy to see why so many businesses fall into financial difficulties.
How Can We Help?
Cash flow is responsible for 90% of business failures and will be a huge contributing factor to the increase in businesses finding themselves in significant financial distress. Sending invoices out as soon as your products or services have been delivered and following up those invoices can go a long way to improving your cash flow but sometimes that’s not enough. We have also spoken in the past about how getting your payment terms right from the outset is vital. Read our previous article about payment terms here.
Chasing payments yourself is a huge time drain but, unfortunately, it becomes a necessity if you’re a small business. If you instruct My Debt Recovery, we will work quickly and efficiently with all the necessary tools at our disposal to collect outstanding debts from your debtors. We’ll proactively approach each of your debtors with a professional but understanding attitude and attempt to reach a positive outcome for you, collecting your debt in the process.
My Debt Recovery works on a no collection, no fee basis so there’s nothing to lose, contact us today and we’ll be on your side so that you can make your way through the rest of 2020 and beyond, in a much stronger financial position. Contact our team on 0800 009 6106 or firstname.lastname@example.org.