R3 Eastern urges firms to assess credit risk of new customers
- Credit: Archant
More than 30,000 businesses in the East of England were owed money by at least one supplier or customer which went into insolvency last year, according to research by the eastern branch of insolvency trade body R3.
The survey, part of R3’s regular Business Distress Index report, shows that a total of 34,000 local businesses, around 11% of those in the region, were creditors in an insolvency procedure in 2015. Of those businesses, a total of 20,000 were creditors in two insolvencies last year.
Nationally, the figures show that medium-sized businesses – those employing 51 to 250 people – were most likely to have been exposed to another firm or individual’s insolvency, with one-in-seven (14%) of these businesses owed money by an insolvent individual or company.
R3 Eastern chairman Frank Brumby, a director at Isadore Goldman in Norwich, said: “Day-to-day, businesses can encounter two classic problems: going for growth by taking on new customers without thoroughly checking their creditworthiness, and a failure to devise and implement controls to monitor their exposure.
“This leaves growing businesses, particularly medium-sized ones, as the most at risk of being exposed to others’ insolvencies.
“Although the UK insolvency regime is ranked as one of the best in the world, it is often the case that those owed money in insolvencies will not see all of their money returned. This, of course, can have a serious impact on a creditor’s finances.
“R3 would therefore urge businesses to take timely preventative measures and properly assess risks before trading with individuals or other firms. Doing so will minimise the chance of being exposed to others’ insolvencies from the outset.