A falling rate of business insolvencies is no reason to let your guard down when taking on new clients – or even when dealing with existing customers whose financial circumstances may have changed.
The latest figures from Experian show a slightly lower rate of business insolvencies in 2012, at 1.04% of all firms, down from 1.1% in 2011.
Microfirms – those with only one or two employees – fared reasonably well, with 0.73% entering into insolvency proceedings, although this was slightly up on 0.71% the previous year.
Large firms also saw their insolvency rate rise, from 1.46% to 1.61% year-on-year, and this includes the headline-grabbing administration procedures of several high street names in the run-up to Christmas.
Elsewhere, however, business insolvencies fell: firms with 11-25 employees saw their rate drop from 2.6% to 2.35%, 26-50 employees from 2.59% to 2.21%, and 51-100 employees from 2.22% to 1.83%.
But with performance depending on a range of factors – including business size, location and sector – caution is still advised to those involved in supply chains across the UK.
“Ongoing monitoring of all clients and suppliers, regardless of size, is essential,” says Max Firth, managing director of Experian business information services in theUKandIreland, “as the impact of larger corporate insolvencies can be felt down the supply chain.”
If you have clients within one of the sectors where headline-grabbing insolvencies have occurred in recent months, be vigilant for the impacts filtering up to your link in the supply chain.
Where clients begin to delay payments who have not done so before, it is worth being realistic about the prospects of them paying you in the near future – and CPA can help you to take appropriate action if it appears that your client may be on the brink of insolvency themselves.