More than three quarters of UK SMEs have lost money as a result of a customer becoming insolvent, according to new findings published by information services company Experian.
The firm surveyed 600 SMEs to understand the impact of customer insolvencies in the supply chain; it found that, in the last five years, 76% of SMEs have lost money as a result of customers failing. Nearly a fifth (19%) of these businesses each lost between £5,000 and £10,000, while 35% lost more than £10,000 over five years.
When asked how often credit checks were carried out, 68% of SME owners said they checked their customers’ and suppliers’ credit ratings at least once a year; 24% admitted that they only credit checked new customers, and didn’t carry out ongoing checks; 38% had been running a business for over two years but had only just started carrying out regular checks; and 34% of business owners only started monitoring suppliers after they had already lost money. Ade Potts, managing director of Experian’s SME business for the UK and Ireland, said: “Waiting until you’ve lost money to do credit checks is a bit like shutting the stable door after the horse has bolted. Unless businesses check the credit status of their customers at least once every six months, they risk exposing themselves to further loss.
“The rate of deterioration is far quicker for companies in today’s climate, so the sooner you can spot the signs of financial stress, the sooner you can react. Ongoing monitoring, addressing financial issues such as late payment of invoices head-on and not relying on one big customer or supplier will help lessen the risk of further losses as a result of insolvencies.”