Problems with late invoice payments are affecting around one in eight Scottish firms, according to new indicative research by insolvency and restructuring trade body R3.

The latest edition of R3’s regular Business Distress Index, which looks at measures of business success and distress across the UK, indicates that 12% of firms in Scotland are currently owed payment on invoices that are more than 30 days past their due date (UK: 18%). A 2016 R3 survey of the insolvency profession found that late payment for goods or services had been a primary or major cause of 23% of insolvencies in the preceding twelve months.

Tim Cooper, Chair of R3 in Scotland and a partner at Addleshaw Goddard, says: “The impact of late payment problems have been made more visible recently, especially in relation to the Carillion liquidation, and despite a great deal of effort in recent years to improve business practice around paying suppliers on time, there is clearly much more that needs to be done. Late payments put unnecessary strain on the finances of businesses, and can stop them investing in new services, taking on new commercial opportunities or even having enough cash in the bank to cover their day-to-day costs, which can threaten their very viability – something that R3’s members encounter every day through their advisory work with distressed firms.

“Business owners need to stay on top of their invoice ledger and to tackle late payment issues as soon as they start to become apparent. The ‘domino effect’ of the failure of one firm impacting on others is well documented, but there are options available to help firms mitigate the impact of late payments.”

R3’s research, which is based on interviews with 500 nationally representative businesses by BDRC, also suggests that 55% of regional firms are currently recording any of the five measures of growth that it monitors, the same proportion as in the UK overall. Scottish companies’ optimism about their own prospects over the next 12 months appeared to have fallen back slightly in December compared to September 2017, to 44% (September: 48%), although this is still seemingly higher than in April of last year, when just 27% of Scottish firms indicated they were optimistic about their prospects.

Compared to the UK overall, Scottish companies are likelier to predict clouds on the horizon, with around 30% of Scottish firms more optimistic about the general economy than they were three months ago (UK: 40%), and 46% more pessimistic (UK: 27%). Scottish firms’ optimism appears to have fallen slightly compared to September 2017, when 38% of those surveyed were upbeat about the economy; pessimism has also edged upwards, from 44% in September.

Tim Cooper said “Slightly higher levels of pessimism among Scottish firms aren’t necessarily a bad thing, as all businesses will benefit from active vigilance regarding potential threats and sources of distress. Companies are also more positive about their own prospects than those for the economy as a whole, but staying alert and taking action before it’s needed is a smart strategy, especially in unsettled circumstances.”

“Seeking early advice from a qualified expert can mean the difference between success and failure for firms which are feeling the chill, be that due to late payments, or any other issue.”