Recent figures have revealed that company insolvencies hit a five-year high in the second quarter of this year, and experts warn that businesses need to be more aware of the stability of their supply chain.
According to the Insolvency Service, 4,321 companies, entered insolvency in the period from April to June – this was up from 4,213 in the first quarter and marked the largest total since early 2014.
In these uncertain times, it is therefore vital that business owners know the stability of the people they trade with, as even one major customer going down could severely affect their solvency.
Moreover, separate figures showed that 14 per cent of all active businesses in the UK are in significant distress, with the average company debt rising by a whopping 122 per cent over three years to £66,000.
However, business owners can conduct regular credit checks on existing and prospective customers, and take other steps, to reassure themselves that they have done all they can to mitigate these risks.
Many business owners claim that they do not have enough time to do this, but this is easier than ever with modern technology, as there is an increasing number of platforms that can provide credit scores to business leaders quickly and regularly.
Using such tools can allow the business owner to quickly check on profit and loss statements, balance sheets and payment history of prospective customers, thereby minimising the risk of being taken down by bad debt.
Tim Close, Insolvency Partner at Milsted Langdon said: “The findings of the report highlight the need to do regular due diligence in a bid to limit your risk.
“If you are concerned about your supply chain then it is important you seek specialist advice to discuss the range of options available to you. Contact us today to find out how we can help.”