Public Relations Manager, Business Information
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Experian suggests small business resolutions for 2009
UK, Nottingham, 29 December 2009 - With market conditions impacting on all sizes of organisation in virtually every sector of the economy, Experian®, the global information services provider, today outlined a series of New Year’s resolutions for small businesses, providing those organisations most exposed to late payment and potential cash flow problems with advice to help them through the downturn.
Analysis of the sales ledgers of over 400,000 businesses conducted by Experian showed that at the end of October 2008, small businesses were bearing the brunt of increasing late payment of invoices across all industry sectors. While small businesses were taking an average of 60.3 days to settle their bills following invoice, their medium and large customers were taking an average of 61.4 days and 81.6 days respectively. Meanwhile, to the end of November 2008, insolvencies were showing a 32 per cent increase compared to 2007.
Tony Pullen, Managing Director of Experian’s Business Information division commented: “The economic downturn has already claimed some significant casualties amongst the biggest retail, financial, construction and property businesses around. The effect of each failure, while devastating to the firm and those that lose their jobs, extends far beyond the organisation itself, to threaten the survival of many smaller companies that supply and rely on those organisations.
“Small businesses feeling the squeeze from both larger organisations and other SMEs they do business with need to be pro-active and take steps to manage risk, maintain a positive risk profile themselves and use what marketing budget they have most effectively.”
Experian advice to small businesses for coping with the downturn:
Monitor you own credit business report and those of your existing and potential customers for early indicators of potential difficulties ahead. These provide a myriad of information to enable organisations to make effective business decisions – who do they want to do business with and how much credit should they extend to them.
Watch out for late payment. Pay your own bills on time and watch how your customers are paying you. A worsening trend with bills being settled later and later each month is one of the key indicators of a deteriorating cash position.
File annual returns and financial accounts on time and monitor how timely your customers are filing theirs. Experian’s statistical analysis shows that businesses with poor trading results tend to delay submitting their accounts as long as possible hence late filing of accounts is often perceived as a sign of bad news.
Avoid County Court Judgements. Whilst in more stable economic conditions the incidence of one CCJ would not necessarily involve the withdrawing of credit lines, it is more likely, in the current economic climate, that suppliers could take summary action against customers who incur judgements. CCJs do have a greater impact on the credit ratings of small businesses.
Watch your own finances. For smaller and newly formed companies without a proven credit history, blended information, which cross references consumer and business information, can be used to give a picture of the personal and wider business interests and track records of those running a company. In cases like this where financial data can be scarce it can often be the best indicator of the business’s likely commercial integrity.
Register with a credit reference agency or a directory such as Yell or Thomsons. If you’re not then the likelihood is that you’ll fall below the radar and that CRAs will not be able to assign you a rating or risk profile, which could restrict access to credit.
Screen out poor performers from new business activity. Checking the contacts in your customer and marketing databases against their credit reports helps weed out high-risk business prospects. There is little point in targeting a business with a poor payment record or one that is already on a rocky financial footing.
Analyse and segment your prospects. This allows small businesses to better identify, understand and thereby target their best prospects, cost effectively.
Retain existing customers. Focus on customer management to retain existing business. That means leading on service and developing a real customer experience with various touch points throughout the year as opposed to just making contact when a customer appears about to walk.
Use email marketing cautiously. The e-channel is a highly effective way of retaining customers and targeting new prospects, but small businesses need to exercise caution when email marketing and not simply rush to using a cheaper marketing channel as the quality of email data for marketing purposes can vary dramatically.
Adds Tony Pullen: “These are tough times for businesses, but the message is clear. Make risk assessment a priority - know your customers and know who you’re doing business with to help ensure your business survives the downturn.”
For more advice on managing in the credit crunch visit www.experianbi.co.uk.