Bad Debt Risk – 7 in 10 SME’s not checking customers’ credit status

A worrying lack of credit awareness and bad debt protection amongst the UK’s small and medium sized business community has been revealed by new research from Experian, the global information services company.

Experian recently did a survey of nearly 700 UK small businesses and it found that over 70% did not check their customers’ credit status, thereby exposing them to a greater risk of being paid late or not being paid at all. The survey also revealed that nearly 40% of small businesses did not even know what a credit score was and almost 2 in 3 small businesses have never checked their own score.

The reality is that credit scores are not just tools to limit bad debt as businesses that do not check their own scores are unlikely to be aware of any credit worthy issues until they lose out on a contract with a potential new customer, or perhaps are refused credit terms from a new supplier or are turned down for finance. But more worrying than not checking their own score is the fact that so many small business owners are simply not checking the credit score of their customers, either before extending invoice terms to new customers, or in the routine assessment of ongoing credit and invoice terms so as to limit the risk and exposure to late payments, bad debt and the incidence of needing debt recovery, debt collection and legal services in the pursuit of unpaid invoices.

With so much attention in the press devoted to the poor economy, lack of future growth and the difficulties faced by small businesses and the late payment mountain, it is somewhat disturbing to learn that not even the most basic of safeguards are being taken advantage of. It is almost akin to not bothering to check whether you have a parachute before you leap out of a plane.

For whatever the reason, Business Credit Reports should form a regular element to any business and its offering of credit terms to new and existing clients. The Experian survey concluded that 40% of SME’s don’t even know what a credit score is. This shows that there is a significant lack of awareness and one that needs to be addressed.

Credit Reports can also be daunting to those who don’t know what to look for. That’s why services such as Outsourced Credit Control,, also known as Outsourced Credit Management, can be a vital service to SME’s whom cannot justify the cost of a full time in-house credit management team.

Chasing debt and setting credit limits diverts attention away from your core business activities. More often than not, staff that are chasing payments, are not trained to do so, nor aware of the procedures and legal processes to be adhered to. As such, to have a fully trained and competent in-house collections team can therefore be very costly. With Outsourced Credit Control Solutions you get the benefit of having a dedicated, fully trained and competent credit control team, but without the cost, and credit reports are used as part of the service so as to inform and advice the client business about appropriate credit levels and terms for their customers, thereby outsourcing this vital, but often under utilised tool in the battle to reduce late payments, and the onset of bad debt.

If you wish to engage CCDR to help protect and shield your business from late payments or your debtors going into liquidation, call us today and we can assist you in being proactive to reduce future bad debts through services such as our Outsourced Credit Control, or for those where the debtor isn’t paying, we have a range of services such as Debtor Tracing, Debt Mediation or Debt Recovery depending on what stage your late payment problems is affecting your business.

CCDR is a leading Liverpool Debt Recovery specialist with international reach and a client base of SME’s and multinational organisations.