The Insolvency Statistics from October to December 2016 found that the total number of company insolvencies were higher in 2016 than the previous year. The underlying number of company insolvencies was unchanged in 2016 compared with 2015.
Co-Owner of The Channel Partnership, Tom Rolfe commented: “The numbers are what they are – Q4 2016 up by 4.2% on Q3 2016 and up by 7.6% on Q4 2015 – trending at around 0.47% of UK trading companies going bust each year which equates to 1 in 200. So you can work out your average likelihood of an insolvency, if you have 50 live accounts you could expect one bad debt every four years, if you have 1,000 customers then you could expect five per annum. Are you doing better or worse than the average? Why? As the likelihood of insolvency has dropped, the cost of credit insurance has dropped over the last five years, so the cost of credit insurance cover tracks the risk of insolvency.”
Rolfe continues: “In November 2016, Experian, one of the UK’s leading credit reference agencies, was recommending offering credit to nine of these companies for an amount between £6k and £1.3m at the time of the announcement of their insolvency. It goes to show how hard it is to predict an insolvency; even for the credit reference agencies.”
Rolfe concluded: “A large bad debt can be fatal for a supplier. So even if the risk of an event is seen to be low, the impact might be catastrophic – all factors that should be included in the approach to managing trade credit risk. We at The Channel Partnership help companies consider how best to manage (and profit from) trade credit.”
To find out more about managing trade credit and protecting your business against bad debt and insolvencies, please contact us on 01275 817320.