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Almost half
of all SMEs have lost an estimated total of £5.3 billion in debts owed by
trading partners who have gone out of business, according to research published
by CreditPal.
The research estimates that 43% of SMEs have lost money owed to them in the last
two years.
The study also revealed the average amount owed to an individual SME in the UK
was £7,500, highlighting a need for small businesses to ensure better awareness
of their trading partner’s financial status.
Chris Poll, chief executive of CreditPal, explained: "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.
"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."
The professional services sector has been worst affected by losses, particularly
the accountancy and legal services sectors. Least affected were the hospitality
and leisure industry sector.
SMEs based in London suffered most from defaulted payments, with 49% owed money
by trading partners who have gone into liquidation.
SMEs based in Scotland fared better due to less exposure to bad debt, with 36%
affected.
Source: Credit
Control Journal
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