Bad debt and the inability to manage finances are major contributors to company insolvencies, according to research released today by independent financier Venture Finance. In a survey of accountants, 69 per cent said they believe SME insolvencies are the result of a business’ inability to manage its finances and 17 per cent blame thousands of SME insolvencies on the issue of bad debt.

Venture releases these figures as the latest insolvency statistics from the Department of Trade and Industry are made public today. According to the insolvency service report, there were 3,194 company liquidations in the last quarter of 2006 illustrating that bad debt remains a financial challenge for SMEs.

To date, employment levels have remained high and interest rates low. However, with rates already on the rise in January and forecast to rise further during 2007, SMEs may find they are operating in a very different climate. Measures can be taken to ensure companies not only maintain a strong cash flow, but are also protected against late payment or non-payment.

Steve Websdale, director of Venture Finance comments: “Accountants are a voice of authority in the business world and companies should heed their advice – this is no time to be complacent. In lights of the latest DTI insolvency statistics, companies need to make their financial resolutions for 2007 and get their finances in order.”

“It is well known that between one third and a half of all new businesses fail within the first three years of trading. This indicates that both poor management and bad debt remain significant hurdles to a business’s success.”

A combination of bad debt protection and invoice finance, which unlocks the value of unpaid invoices for instant use, helps ensure that a company can maintain a positive cash flow and deal with problems arising from non-payment.

Stanley Coltman, insolvency practitioner with Tenon Recovery Group comments: “Unfortunately, it is a fact that numerous sound businesses find themselves suffering from cash flow difficulties following an unexpected bad debt, a queried invoice or a habitual late payer. It is critical that the cash needs of the business are controlled, a cash forecast produced and control mechanisms installed and monitored regularly. However, this is often overlooked and neglected during the critical first years of the growth of a start up business.

“Bad Debt protection does exactly what it says on the tin by protecting a business from late payment or a customer becoming insolvent. It offers peace of mind to the business and ensures it will stay in control of its finances.”