Tax & admin 24 August 2016

Survival rates for small businesses plummet within first five years

survival
Regular credit checks give small and micro businesses a far higher chance of survival
Just four in ten new UK businesses make it to the age of five, despite 91 per cent making it through the all-important first year of trading, new analysis has shown.

A key factor that sees businesses across all industries falter is a failure to conduct regular credit checks, leading to vast amounts of debt being written off, data collected by Ormsby Street has found.

Data collected by Ormsby Street found small businesses that conduct regular credit checks have a 30 per cent greater chance of survival in the first 12 months than those that don’t.

Advising small firms of the dangers of poor credit management, Ormsby Street managing director Martin Campbell said: Poor cash-flow is mostly caused by late payment of invoices and this is certainly something that can be addressed by any small business.

measures include being strict and upfront about payment terms initially and using the right tools to provide insight into how they should trade with customers and what action to take to reduce risk of non-payment.

Outstanding debt accounts for large losses for small businesses in Britain. According to a new Direct Line for Business study, 82 per cent of SMEs are owed outstanding debts from customers, with a combined 5.8bn written off in the last financial year.

Indeed, 19 per cent of small businesses in Britain wrote off an average of 31, 330, with almost one in ten claiming to have lost written off debt in excess of 100, 000.


 
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