Business Media Articles (Archived)
SME Sector Suffers in Downturn
The small-and-medium-sized (SME) business sector saw more firms go to the wall last year, according to recently released figures from credit reference agency Equifax.
Business failures across all businesses were up markedly on the previous year, but it was the SME sector, and those SMEs operating in the retail sector in particular, that bore the biggest brunt with the numbers of businesses going bust up 25% compared to 2004.
Now Equifax is warning SMEs to improve their credit checking procedures or face the potentially damaging consequences of bad debt that may lead to eventual closure.
Neil Munroe external affairs director at Equifax said: “The latest insolvency figures don’t paint a pretty picture and small businesses stand to lose a lot if they don’t heed this warning. SMEs can protect themselves by putting simple checking processes in place.”
Simon Briault of the Federation of Private Businesses insisted that the onus of responsibility has to be with the larger companies – who provide the bulk of SMEs business – to be aware of the problems that slow payment can cause to their business partners. He said: “Large businesses are aware that their smaller counterparts operate on tight margins, but still take on average 40 days to pay them. That can be crippling to a small business, since the majority of their income usually comes from just two or three clients. It’s not acceptable.”
Other business sectors that suffered particularly badly last year were the hotel and catering sector which tied for second place with the construction industry, both recording increases of 19% year on year. The transport and communications sector reported an increase in failures of 11% and manufacturing saw failures rise by 7%.
New online tools mean that smaller businesses can check a customer’s current credit worthiness instantly before a commercial relationship is started. And email and SMS alerts can give updates on changes to an account, such as CCJs, new directors or a credit limit change.
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