Factoring mitigating increased bad debts

28/08/2008

Bad debts are rising like never before and companies are increasingly becoming aware that factoring offers an insurance against their customers failing to pay for goods and services provided.

It is likely that bad debts will be a growing problem for small businesses for the rest of the year. When conditions are tough, it is very tempting for customers to stretch out the time they take to pay suppliers. Alliance Boots attracted a storm of negative publicity when it announced it would pay its suppliers within 90, rather than 60 days.

In a recent survey by the UK200 Group, a trade body, 71% of respondents said customers were taking longer to pay their invoices. Small businesses are particularly vulnerable to cashflow problems when their customers pay late - or fail to pay at all - and factoring could offer a solution.

According to not-for-profit group The Registry Trust, bad debt judgments against individual businesses jumped 4% to 185,395 in 2007. Chairman Malcolm Hurlston said: "I certainly expect the upward trend in commercial judgments to continue in 2008, which promises to be a tough year for British businesses - especially in the small and medium-sized enterprise sector, against which most of the commercial judgments are made."