A record 50,000 companies are being created each month, with 587,000 being set up in the UK alone in 2014. Although the UK’s population of start-up companies is increasing at the fastest rate, there are a number of challenges which make it hard for them to survive beyond the two year mark. The numbers have more than quadrupled since 20 years ago when only 130,000 companies were set up in 1994.
Ade Potts, Managing Director of Experian’s SME business, said: “It’s easier now than ever to set up your own company, all you need is a laptop, mobile phone and home office in many cases. But at the same time, it’s never been harder for small companies with the risks imposed on them by suppliers settling invoices late and customers falling into insolvency.
Credit checking your customers and suppliers is easily done and could help your company to celebrate many more birthdays after the second one.”
With this in mind, Experian have launched a new product aimed specifically at small companies under two years old to tackle this problem. By offering 99 credit reports for £99, we hope this is a step forward in helping you to make smarter credit decisions in an affordable way. You can make sure that everyone you’re working with is creditworthy and capable of paying you on time. On top of this, we’re throwing in £20 of free marketing credit to help you find your next set of customers.
The UK’s smallest companies (with one or two employees) were the quickest at settling overdue invoices in the tax year of April 2014 to March 2015. The top three groups of performers paying their days beyond terms (DBT) are:
Sole traders/Duos – 20.58 DBT
Six to ten employees – 21.19 DBT
Three to five staff – 21.34 DBT
Large companies with more than 501 staff members took the longest to pay overdue invoices at 34.18 DBT, way above the average of 24.29 DBT. Small companies need to bear this in mind when working with large companies who may not be so quick in paying their invoices. If this isn’t accounted for well enough, you could end up running into cash flow difficulties.
The payment performance of companies also varies by region and industry. For example, companies in Northern Ireland settled overdue invoices 15.93 DBT compared to those in the North West which took 30.44 DBT. Agriculture, forestry and fishing was the quickest industry to pay after 9.98 DBT with the poorest being telecommunications taking 44.44 DBT.
Quick tips to reduce late payment:
- Status check: Is the company you’re dealing with real? Four out of ten companies which start up don’t actually go on to trade.
- Thorough research: Running a credit check on anyone you plan on doing business with will reveal their credit status, trading history and help you make informed decisions.
- Remain watchful: Conditions change rapidly so monitor your customers on an on-going basis and take a proactive approach to dealing with potential payment problems.
- International outlook: Take similar or more precautions when exporting as you would do when doing business within UK.
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