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SMEs advised to tread with caution as corporate insolvencies escalate

04/05/2012

The latest rise in corporate insolvency as reported by the Insolvency Service has reaffirmed that it is vital for businesses to be cautious when offering credit to firms.

Hilton-Baird Collection Services' most recent Late Payment Survey, which questioned almost 250 business owners and finance directors in the UK during January 2012, highlighted that late payment remains an issue for small businesses. However, despite the rising insolvency rate, fewer than half our respondents actively credit checked new customers (47%) in the second half of 2011, with fewer than one in three credit checking existing customers (30%). This does not indicate the necessary caution.

The consequences of late payment are well documented, with the annual survey additionally finding that businesses had to wait an average of 17 days beyond their agreed credit terms to be paid in that period. A result of this is that 32% of businesses now classify more than 10% of their debtor book as bad debt.

Unfortunately, late payment has also had a knock on effect down the supply chain which only exacerbates this problem further. Well over half of businesses admitted to paying their suppliers later (59%) as a result of their customer paying an invoice late. Meanwhile 34% said that the single most common reason for late payment was that they are waiting to be paid by their own customers. However, for 13% of respondents the most comment reason for late payment was that their customer simply couldn't afford to pay. This provides the biggest cause for concern as the financial health of SMEs continues to be under increasing pressure.

Alex Hilton-Baird, Managing Director of Hilton-Baird Collection Services, commented: "The findings of our Late Payment Survey serve to highlight just why it is so important for businesses to do all they can to ensure that they have run the necessary checks on their customers before agreeing to supply goods or services on credit. Our experience has found that corporate insolvency is a persistent problem which historically escalates until long after a recession. Worryingly we're seeing that it's a trend which is likely to continue for the foreseeable future.

"It is our hope that businesses really look to safeguard their cash flows against the trend of late payment in the coming months by taking all the vital precautions. Then, in the eventuality that late payment does occur, businesses have all the resources at their disposal to ease the knock on effect businesses so commonly experience."

Download this report to view the full results...

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For further enquiries, please contact Imogen Dunn or Rachel Finlay at Teamspirit PR on 020 7360 7878 or email idunn@teamspiritpr.com / rfinlay@teamspiritpr.com

Note to editors:

Alex Hilton-Baird is Managing Director of Hilton-Baird Collection Services, which is part of the Hilton-Baird Group of companies. Established in 2001, Hilton-Baird Collection Services has provided award-winning outsourced debt collection services to the UK's SME and Corporate markets, as well as some of the most respected invoice financiers, leading banks and insolvency practitioners for almost a decade.

Hilton-Baird Collection Services was voted Commercial Debt Collection Agency of the Year in 2008, 2010 and 2011 by Credit Today magazine, whilst Team Leader, Charlotte Christie, was awarded the Commercial Collector of the Year title in 2010. Such awards are testament to the continuous investment Hilton-Baird puts into making its debt collection services the best on the market, with regular training and technological innovation at the core of ensuring a fast, flexible and efficient response to business debt recovery needs.

To find out more about how Hilton-Baird Collection Services can assist, contact Alex on 07958 745088 or email alex@hiltonbaird.co.uk. Alternatively, visit www.hiltonbaird.co.uk/cs.

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