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4 ways to reduce risks from the rise of company insolvencies

Protect your cash flow by ensuring your customers pay and suppliers deliver.

Ollie Maitland Nov 30, 2022

Small actions to help with extra company risks 

It’s often a topic we business owners prefer to avoid, thinking about one of our customers or key suppliers going out of business. But with a 38% rise in insolvencies it’s worth considering how small businesses can protect themselves.

Business with larger customers or complex supply chains are often most at risk; so if you’re in construction, retail and manufacturing it’s worth having a read.

With large tax bills, holidays and a less productive month a ripple effect of late payments often runs through the UK. With cashflow tight from higher input costs and elevated insolvencies this season may be worse. 

So over the Christmas period if you have large supplier or customer commitments, it may be best to take some pre-festive pros.

 

Tip 1: Check the company credit scores and limits of your customers and suppliers - at least the big ones

Credit bureaus such as Experian, Creditsafe and Dun & Bradstreet are in the business of figuring out the probability of companies defaulting or going out of business.
Each bureau has a company credit score which will indicate the risk of a company. They also: 

  1. Check the credit score for a business - if it’s lower than 30 points then perhaps consider not doing business at all with that company
  2. Monitor for any changes to a credit score - if it goes down perhaps they might have already been impacted
  3. Keep debts within suggested credit limits - each company will have a suggested credit limit. So you can ensure that you don’t overextend credit to customers who may not be to repay.

Both of these can be done on Capitalise for Business with our company credit check feature.


Action: Monitor your customers and suppliers credit scores 

 

Tip 2: Chase debts in the run up to Christmas - and put in payment schedules

Our British sensibility often means that calling up customers to ask for payment is probably the least favourite activity for many business owners. 

Unbelievably almost ⅓ of payments are late (ICAEW) so this does mean you need to be hot on speaking to customers.

There are many ways to chase up overdue invoices and accounting platforms such as Xero, QuickBooks and Sage will send out automated emails. This doesn’t however beat putting in the phone calls in the tough months of credit control.

Leaving messages with reception, customers and even trying to call from a number withheld can make sure you get commitment on payment dates. Follow-up with any verbal agreements in email as this will be useful should you have to go to court.

Ultimately you want to be the company that gets their money paid over others during this time period, so don’t be afraid of calling up very frequently.


Action: Check customer credit worthiness to support your credit control process
 

Tip 3: Start a debt recovery process on customers you know are at risk

At times customers simply may avoid paying. At this point, if no payment dates are forthcoming, we highly recommend escalating bad debt to a third party.

At Capitalise, we can help you access a legal service to recover bad debts on a no win, no fee basis. This is funded all the way to the high court and is a customer friendly but firm legal process from the get go.

Not all customer debt will qualify but if you have good documentation (such as signed contracts and proof of delivering the goods) then it’s likely you can use this service.


Action:  Add your customers to Capitalise to check if they have any adverse credit

 

Tip 4: Consider using insurance to cover large customers or suppliers 

A product which can help some businesses is insurance. This allows you to insure the risks of customers becoming insolvent so that debts you’re legally due, can be repaid by the insurer.

Trade credit insurance, as it’s called, is common across many sectors and is typically a policy which covers your largest customers. 

It’s paid as a monthly fee and quoted based on the risk of your sectors and customers.


Action: Speak to Capitalise about trade credit insurance

 

Getting started (for free) with company credit checks 

Capitalise is here to help businesses keep control of their business finances. We’ve built our business finance platform to help business owners reduce risks and know where you stand. 

What’s more you can add and monitor up to 20 companies for free to see if they have any major risks. If you want to get a full company credit report then you can upgrade to get their full Experian profile.

Login to your account or sign-up for free if you haven’t already got an account

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