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More than half of UK accountants believe that having bad debt protection in
place is important for business in the current economic climate, according to
research from invoice and asset-based lender, Venture Finance.
The loss of liquidity in the debt market has already seen companies face
difficulties when trying to refinance, resulting in businesses of all sizes
experiencing an increase in late payments and bad debt.
This year has already seen recognisable high street firms, such as Stead and
Simpson, Dolcis, The Works Retail and MK1 fall victim to the credit crunch.
Forecasts are now showing that the number of business failures between 2007 and
2009 is expected to increase by 18%.
It comes as no surprise that many SMEs are feeling vulnerable.
It is important for businesses to take measures to not only maintain a steady
cashflow, but also to protect themselves against late payment or even customer
insolvency.
However, there remain scores of businesses that have no protection in place,
often a result of having misplaced confidence in their customers.
Just 20% of the accountants surveyed had business clients currently looking into
bad debt protection services.
Peter Ewen, Managing Director at Venture Finance commented: "The misguided
assumption that 'it will never happen to me' is very dangerous, especially in
these uncertain times.
"It is predicted that insolvency levels will continue to rise throughout this
year and next, surpassing even those of the dot.com bubble burst in 2002, which
saw almost 20,000 business fail, and the subsequent ripples will be far reached.
"It is encouraging, however, to see that accountants recognise the value of bad
debt protection - perhaps because they have witnessed the consequences of
businesses not doing so in the past".
Particularly for a young company, late payment and non-payment can have a
significant effect on cashflow causing huge financial strain and threatening
business security.
Ewen added: "There is, however evidence to suggest that more experienced
businesses are taking preventative measures. Venture has seen the number of new
clients enjoying the benefits of our Bad debt protection more than double in the
first quarter of 2008, compared to the same period last year."
Source:
RedAlert
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