The faltering steps the economy is taking towards recovery seem to be breeding a degree of overconfidence on the part of some businesses, but there is no reason to abandon good credit control practice. According to a recent report from Creditsafe, more than half of UK firms have suffered losses in the last year because they either neglected to do their homework on those with whom they were forming contracts or failed to attend to contract formalities. A substantial minority also entered into contracts with customers who subsequently proved unable to pay for the goods or services provided.
Other recent surveys report that more than a quarter of businesses say they are experiencing cash-flow difficulties and nearly half admit to having worries about their ability to service their debts. At the same time, the indications are that both HM Revenue and Customs and the banks are taking a hard line with businesses experiencing financial problems.
The most dangerous phase in the credit cycle is when the economy is beginning to grow again. It is good business practice to ensure you take steps to minimise your credit risk.
Click here for guidance on dealing with the risks associated with new customers.