The number of firms experiencing late payments has more than doubled in the past six months, according to the latest Baker Tilly Finance Director Survey.

The survey shows 41% of chief financial officers (CFOs) reported problems with late payment, up from 19% in March.

Mark Harwood, audit partner and head of governance and risk management at Baker Tilly, says: “Increasingly, businesses are having to fund their working capital through stretching credit terms with their suppliers as they can’t rely on invoices being paid on time. This creates a chain reaction throughout the economy. However, the stark reality is that elastic can only be stretched so far before it snaps and we will see more companies go bust as pressure on working capital increases.”

The survey also reveals that :

• 54% of respondents predict no improvement at all in trading conditions for their business over the next year
• 28% expect worse trading conditions in 2010
• 60% have made redundancies in the 12 months to September 2009 up from 42% in the 12 months to March
• 57% of CFOs are worried about an increased risk of criminal fraud affecting their business as a direct result of the recession
• Lack of bank credit is no longer seen as the main factor adversely affecting business performance.  Lack of consumer confidence is seen as more important (35% v 29%).

Rob Donaldson, partner and head of M&A and private equity, says: “Reduced concern about the availability of bank credit could be interpreted as a positive sign of an easing of credit conditions.  However, as evidenced by the pressure on supplier payments, I suspect it more reflects businesses simply getting used to tough conditions and moving on.  Some entrepreneurs have given up on their bankers and are finding another way.”