Businesses fear rising debts and falling profits

New research has revealed that businesses are becoming increasingly worried about the twin problems of rising debts and falling profits.

Surveys carried out by the insolvency trade body R3 show that one in five businesses (19%) are worried about the amount of debt they owe to their creditors.

At the same time, more than 850,000 businesses are experiencing decreased profits. More than 40% of businesses had seen a reduction in sales volume and 32% had seen their market share reduce.

The R3 research shows that smaller businesses owe an average of about £110,000 to their bank, £82,000 to trade creditors and £27,000 to the Crown.

It is the debts to trade creditors that cause business owners the most concern.

The President of R3, Steven Law, said: “In a fragile recovery, debt is an important part of working capital in most businesses. With VAT rises and the impact of public sector cutbacks yet to be felt in full, many businesses are concerned about their ability to repay the money they owe in fragile conditions.”

“Worry about trade debts is often more keenly felt as businesses deal with this creditor group on a day to day basis – these debts can therefore seem more obvious than those owed to the bank or the Crown.”

“Early professional advice is the best way to allay fears over debt levels. Ascertaining whether your current debt levels are sustainable should fiscal and monetary policies change is an important challenge for all businesses.”

It is also important, of course, for creditors to take action as soon as debts begin to mount up to avoid the risk of debtors defaulting. It is often the case that taking early legal action is the difference between recovering the debt and not being paid.

Please contact us if you would like more information about credit control and debt collection.