Bad Management to Blame for Nearly 60% of Corporate Insolvencies

According to a recent poll conducted by the insolvency group R3, 56% of corporate failures (non SME) are direct results of the ‘Incompetence or bad management’ of company directors.

Furthermore, it found that a staggering 40% of corporate failures could have been prevented, had the firm sought professional advice sooner.

Commenting on the poll’s findings was the President of R3 Steven Law.

“Regardless of the economic circumstance, no business will survive with poor management in place. I have seen a good workforce let down and sometimes laid off due to management which do not admit and correct their mistakes”

R3 formally known as the Association of Business Recovery Professionals also revealed that some 60% of the UK’s insolvency practitioners are of the opinion that the insolvency process is too forgiving towards directors who head a failed enterprise.

The research also showed that of R3’s members some 74% are of the opinion that   lessons can be learnt from business failure in that it could drive directors to be more successful. An enormous 84% of those polled believe business failure can heighten business acumen.

As per R3’s findings and from reading many business journals and biographies from people such as Richard Branson to the Dragons Den panellists, most have had failures at some point.

Branson’s Virgin Clothes which floated in 1996 but later collapsed is once such example and another of note was Peter Jones of Dragons Den whose mid 90’s computer business collapsed through late and non payments of customers.

Whilst some may argue that Peter Jones failure may or may not have contributed to his prolific rise, it’s just as plausible that he would have been just as determined had he not lost his house, BMW and Porsche?

Either way, whilst some entrepreneur’s do bounce back, there is no denying the collateral damage caused by a business failure. From the business owner and staff losing livelihoods to suppliers financially affected through non payment, or undelivered good and services, business failure can have a knock on effect.

The only question is whether the knock on effect will cause ripples or shockwaves.

If you are worried about how a business failure of a client can impact on your own business its sales ledger and debtor days, get in touch and Corporate Credit Debt Recovery (CCDR) can advise you on services such as Outsourced Credit Control, Business Reports, Debtor Tracing and Commercial Debt Recovery.