At the end of 2017, the Association of British Insurers (ABI) released a report highlighting that £574,000 was paid out every day by credit insurance policies and at the same time revealed that there are a total of 12,000 credit insurance policies in the UK. These numbers indicated that credit insurers in the UK paid out a total of £209,510,000 in a twelve month period, which will have had significant impact on the economy. These pay-outs will have also helped hundreds of businesses to trade and to trade without disruption and of course more than likely will have saved thousands of jobs.
Although these figures are fairly positive, when evaluating them within the context of the wider UK economy they unveil a surprising result; that there is still a level of denial within the economy about the threat from bad debt, and perhaps an uneducated naivety that needs to be addressed amongst UK businesses.
According to business statistics released by Parliament in December, there were 5.7 million active businesses in the UK, with service industries accounting for 74% of businesses, 79% of employment and 71% of turnover. It is also interesting to consider that recent insolvency statistics highlighted that an estimated 18,000 businesses were declared insolvent between Q4 2016 and Q3 2017, and the fact that approximately 80% of businesses fail due to a lack of ready cash; so it makes sense for credit management to be a top priority, right? Well, unfortunately many companies including those in recruitment, still don’t have credit insurance or another back-up plan because they “don’t think it will happen to them”, and lots of businesses also lack effective credit management with 54% of business owners admitting that they forget to invoice at least one project each year, and 72% confirming that they have no idea whether their clients are credible or good for the money.
In order to ensure that your recruitment business is better at managing credit and protecting against potential bad debt, it is beneficial to address the risks before the event and not after. Credit insurance through The Channel Partnership is a great start to building your credit risk management tool box and as a member of the Recruitment Growth Network, contact us to find out more about how you can take advantage of our free credit management health check.