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SMEs suffer from insolvent clients 24 September 2013

Over three quarters of UK SMEs are losing money as customers go insolvent, according to new figures from Experian.

The research shows one in three SMEs have lost over £10,000 after customers become insolvent with a lack of credit checking cited as a primary factor.

Ade Potts, managing director of Experian’s SME business, UK & Ireland, said: “Although over half of SME owners said that they did check their customers’ and suppliers’ credit ratings once a year, this is not often enough to identify potential problems.

“Waiting until you’ve lost money to do credit checks is a bit like shutting the stable door after the horse has bolted.

“Unless businesses check the credit status of their customers at least once every six months, they risk exposing themselves to further loss.”

The research polled 500 UK SMEs and found 76% of respondents had lost funds as a result of insolvent customers, with 19% losing between £5,000 and £10,000. 35% of SME’s surveyed had lost over £10,000.

24% of SME owners said that they only credit checked new customers and didn’t carry out on-going checks, while 34% of owners said they only started monitoring suppliers after they had already lost money.

Potts said: “The rate of deterioration is far quicker for companies in today’s climate, so the sooner you can spot the signs of financial stress, the sooner you can react.

“On-going monitoring, addressing financial issues such as late payment of invoices head-on and not relying on one big customer or supplier will help lessen the risk of further losses as a result of insolvencies.”

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