The financial health of UK businesses improved during the 12 months to May 2012 according to the latest Insolvency Index from credit reference agency, Experian.
The Index, a monthly study of the UK's business population, found that the overall financial strength score rose to 83.65 in May 2012 as firms coped better with the range of cash flow challenges on their business.
Experian also reported that 1,841 companies entered insolvency proceedings last month, or 0.09% of the total business population. This figure is the same as in May 2011 in spite of the economy slipping back into recession during that time.
The smallest firms bore the brunt of the insolvencies as 0.2% of businesses with 6-10 employees failed in May 2012, up from 0.17% one year prior. Businesses with more than 500 staff remained the healthiest financially as their financial strength score rose to 86.01.
Explaining the figures, Max Firth, UK Managing Director for Experian's Business Information Services division, said: “By the time a firms grows into a 6 to 10 employee business, the flexibility it benefited from as a micro business begins to disappear. Fixed overheads become greater and cash flow starts to cause more serious issues if not carefully monitored.
“Our data has shown that historically, the highest insolvencies have consistently been experienced by firms that have between 10 and 100 employees. If a good credit management process is not implemented before reaching this size, then a firm may find it significantly harder to keep its head above water as it grows.”
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