Bad debt is a British disease
30 September 2008
British businesses are four times as likely to be owed monies that has not been paid within the period set out in their terms and conditions compared to their French counterparts, according to new research by Creditsafe, the business credit information experts.
The research reveals that while two-thirds (66%) of British businesses have reported late payments, only one in six (16%) of French companies has experienced the same problem.
However, of the 16% of French companies affected by bad debtors, the average amount owed is a staggering €59,949 (£47,377.62), 64% higher than the average £28,844 owed to British companies.
The reason for this difference appears to be that in France, bad debt is a problem which mainly affects larger companies. In France, late payments have only been suffered by 11% of businesses with less than 10 employees. This figure rises to 41% for companies with 10 or more employees.
In Britain late payments is a problem which is endemic in businesses of all sizes. 53% of sole traders complain that they suffer from late payments, a figure which rises to over 95% (96.8%) of companies surveyed of between 50 and 250 employees.
David Knowles, marketing director, Creditsafe, said: “We have seen late payments become a part of the business culture here in the UK. Companies concerned about cash flow, especially when access to business credit is increasingly restricted and expensive, want to ensure monies remain within their enterprise for as long as possible to ensure business liquidity. Many companies also delay payment of their invoices as they can use the funds to earn additional interest. Unfortunately, this practice has a knock on effect which can have severe consequences, and it’s often less cash rich smaller companies that end up losing out. We therefore urge companies to be very careful in their choice of trading partners”.
Impact of late payments
The impact of late payments is far more pronounced in the UK than it is in France. Of the companies that suffered from late payments in the UK, 39% believe that this impacted on profitability whereas only 19% made the same claim in France.
For smaller operators in the UK, where turnover can be much smaller, the impact of late payments can be crippling. Almost a third (30%) of these businesses has been unable to pay their own bills on time while one in ten has been unable to meet tax obligations. 3% have even been forced to cease trading for a time as a result of late payments. None of the French companies surveyed experienced the same fate as a consequence of late payment
Despite the problem of bad debt not being as endemic in some parts of Europe as in the UK, businesses should not be complacent when assessing whether to trade or partner with those in mainland Europe. With this in mind and with ever increasing cross-border trade Creditsafe recently launched Creditsafe Country, a new freedom package giving customers access to business and company credit reports for companies across much of Europe, including France, Sweden, the Netherlands and Belgium.
Creditsafe was first launched in Norway in 1997 before expanding to Sweden, the UK France and Ireland, supplying innovative credit information services including online national and international credit reports, company monitoring, media monitoring, integrated solutions and credit insurance at an affordable price. It also provides an easy to use ‘traffic light’ credit rating as well as offering a guide to the amount of monthly credit a company should be given. Creditsafe UK is the most chosen by UK companies with over 24,000 customers using its online credit information.
