UK micro firms most likely to suffer from repeated customer insolvencies
Almost five per cent of British businesses employing between two and five people were creditors in more than five insolvency procedures in 2015, according to new figures released by R3, the trade body for insolvency professionals. This was the highest proportion of any size firm.
The research also revealed that some seven per cent of micro businesses had been owed money by at least one insolvent customer in the last year.
Phillip Sykes, the president of R3, said: Credit control can be a real problem for smaller businesses. They might be selling goods or services, but it can be difficult for a small or growing business to make sure it actually collects what it is owed.
when you have a small company exposed to more than five different insolvencies, there is a cause for concern. There could be real cash flow issues there.
Additional research carried out by Experian in 2013 suggested that one of the reasons small firms are more vulnerable to repeatedly becoming insolvency creditors is because each are less likely to carry out regular credit checks than bigger firms are.
Almost one in four UK SME owners only credit check new customers and some 33 per cent admitted to only checking customers? financial health after they had already lost money.
Ade Potts, managing director of Experian’s SME business, said: Carrying out a credit check on any kind of new business partner should be standard practice. This is especially important for the owners of micro businesses, which make up 72 per cent of the UK business population.
Hannah Wilkinson is a reporter for Business Advice. She studied economics and management at Oxford University and prior to joining Business Advice wrote for Kensington and Chelsea Today about business and economics as well as running a tutoring company.
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