More construction industry companies going bust!

What’s the probably that this will happen to you?

Over the last 12 months we have seen an increase in construction industry companies going bust or into liquidation.

We decided to check the facts and figures for ourselves and its quite astonishing what we discovered.

Between March 2017 & 2018, there were 620,285 new companies registered at Companies House. It seems like a large amount doesn’t it? However, this figure is 3.8% down on the previous year. So, less new companies were registered at Companies House.

When you take the above figure and compare it with the fact that in the same time frame, there were 490,738 company dissolutions, it shows that there is a serious problem. In fact, there was an increase of 12.4% of companies closing in comparison to previous years.

So, there were less companies being opened and more companies dissolving!

Insolvencies increased in 2018 to 16,090, which is the highest it’s been since 2014.

What is even more compelling is that just under half (49.3%) of the companies were aged under 5 years old.

According to the Construction Index: “The number of company failures across the UK construction industry increased by nearly 80% in the third quarter of 2018, compared with the same period in 2017.”

According to the Guardian, “the UK construction industry has suffered its worst month (June 19) in over a decade. House builders are blaming the “B word” (Brexit).”

Finally, the level of bad debt owed by the sector to suppliers increased by a whopping 27% to £63.9m!

What can you do about it?

• Make sure you do your due diligence when accepting work from a new customer. Know their address, business owners name, company name and number if limited and their accounts payable department details (if they have one).
• Run a credit report to check their score, finances and payment history.
• Keep a paper trail – get everything in writing
• Ask for payment in advance when working with a “risky business”
• If payment in advance is not possible, look at negotiating lesser terms. 7 days, 14 days? If they miss paying an invoice, stop everything!
• Regularly monitor your customers financials, if something doesn’t “seem right”, often it isn’t!
• Ensure you know the correct process for chasing payments in your industry and have effective credit control in place.

The points above can be achieved by having an effective credit controller in place. Did you know that you can out-source or subcontract this area of your business? It’s often cheaper than employing directly, especially where you may only require “part-time” services.