Experian’s SME Reputation Index highlights how SMEs trading abroad are risking exposure to bad debt and cash flow problems
Nottingham, UK, 12th November 2014 – Almost 85 per cent of UK SMEs who operate internationally do not check the credit history of potential overseas customers or suppliers to verify whether a company is reputable, according to new research by Experian®, the global information services company.
The findings come as Experian launches its SME Reputation Index, a survey of over 500 financial decision makers in SMEs across the UK. The Index illustrates attitudes towards safeguarding financial reputation.
It shows that with the UK economy out of recession, two out of five (39 per cent) senior decision makers at UK SMEs are firmly focused on increasing sales and profitability to grow the bottom line, compared to just eight per cent who are choosing to cut costs. Thirty per cent of SMEs will also be seeking out new customers to drive that growth, particularly younger firms who have been in operation for less than five years.
However, for those companies looking to expand by finding new markets overseas, it would seem that the same rules do not apply when doing business internationally, as they would at home. Among SMEs who operate internationally, just one in six (16 per cent) check the credit history of potential overseas partners. This compares to 55 per cent of all small and medium sized businesses operating in the UK and 28 per cent of micro businesses who check the credit reports of suppliers before doing business with them. For businesses of all sizes there is always a risk in taking on a new customer or supplier and unless they undertake a credit check, SMEs have no way of understanding whether partners are creditworthy and can pay their bills on time or supply the goods promised.
According to Experian’s research, 56 per cent of SMEs trading overseas assess businesses through relationship building. Forty seven per cent say they gauge reputation by visiting their website, with 36 per cent checking their customer references and credentials. A quarter of SMEs rely simply on undertaking desk research to compare a business with its competitors.
With the CBI reporting that businesses are 11 per cent more likely to survive if they export1 ,and the government encouraging smaller businesses to export overseas, SMEs about to embark on international trade must be diligent in terms of who they do business with.
Ade Potts, Managing Director of Experian’s SME business, said: “It would seem that in many cases the same rules of business that UK SMEs operate at home do not necessarily apply once they start doing business overseas, leaving them exposed to unnecessary risks and potential damage to their reputation. Whilst business culture differs from country to country, the fundamentals of ensuring a customer or supplier is financially sound and has the ability to pay on time still stand. Businesses should apply the same level of rigour to their relationships as they would when doing business in the UK, for example, checking supplier and customer credit reports to ensure they continue to not only survive, but thrive.”
SMEs should also consider the following when taking on new suppliers and customers overseas:
Miss Serj Heera
Head of PR, Credit Services, UK and EMEA
T: 44 (0) 115 992 2773 | M: 44 (0) 7837 652169
Notes to editors:
This survey was commissioned by Experian and conducted by ComRes who interviewed 508 financial decision makers in UK SME businesses online between 28th July and 4th August 2014. Data was weighted to be representative of all UK SME businesses by company size and region. The results have been collated by ComRes who are members of the British Polling Council. Data tables are available on the ComRes website, www.comres.co.uk
Experian is the leading global information services company, providing data and analytical tools to clients around the world. The Group helps businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making. Experian also helps individuals to check their credit report and credit score, and protect against identity theft.
Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Total revenue for the year ended March 31, 2014, was US$4.8 billion. Experian employs approximately 16,000 people in 39 countries and has its corporate headquarters in Dublin, Ireland, with operational headquarters in Nottingham, UK; California, US; and São Paulo, Brazil.
For more information, visit http://www.experianplc.com.