CCR Magazine

New research published by CreditPal, a free online service for SMEs, reveals that over the last two years almost half (43%) of UK SMEs have been left with monies owed to them as a result of their trading partners or customers going bust.   The total amount owed to SMEs is estimated to be around £5.3 billion. 

The study highlights the necessity for small businesses to ensure visibility of their trading partners’ financial status. The first step in this process is for SMEs to produce monthly management accounts so they can be aware of any issues with customers or suppliers.  Business owners and managers need to ensure they are accurately assessing the risk of making business transactions and if necessary factor in the likelihood of defaulted payments into pricing strategies.  The research also reveals that over the last two years the average amount of money owed to an individual SME in the UK is £7,500. 

Chris Poll, CEO of CreditPal, commented: “The amount left owing to SMEs as a result of company liquidations is shocking and threatens the survival of some UK businesses.  It is imperative that companies take every step to mitigate their exposure to the risk of defaulted payments, especially as the economy climbs out of recession when the need for cash is even greater.  Companies can utilise credit reports and referencing tools on an ongoing basis, many of which include analysis of payment data trends, to establish the credit worthiness of trading partners.  Ignorance of a business or trading partners’ up-to-date financial position is not an excuse; it is up to the individual enterprise to determine an acceptable current exposure to financial risk. CreditPal is free and designed to help UK business better manager the way they do business” 

London based SMEs have been left most vulnerable as a result of defaulted payments from businesses entering liquidation, where almost half (49%) of all SMEs have been owed money by trading partners who have gone bust.  Those have fared better are based in Scotland where they were least exposed to bad debts, where just over a third (36%) of SMEs were affected.  

The industry sector owed the most amount of money due to customers going out of business is the professional services sector (accountancy and legal services), while the least affected market for SMEs was the hospitality and leisure industry where it impacted only 21% of companies. 

Chris Poll continued: “It is so important for SMEs to be able to assess the viability of the their supply chain.  CreditPal has been launched to help SMEs easily share the necessary financial information to prove their financial viability to customers and suppliers – simply, securely and at no cost.  The information available through CreditPal can improve an SME’s credit score and enable trading partners to assess it on current, easily interpretable and verified information - demonstrating their financial stability and reliability as a trading partner and increasing business for them and their supply chain.”

(Source - CreditPal Press Release)