In the last few months, it has been well reported that the retail sector is struggling. Now the figures are out to prove it. During the first quarter of 2018, the number of retailers that have failed has increased by almost 50%. That equates to 327 retailer failures in the last 3 months as reported by CreditSafe.
The Big Ones Cause the Biggest Wave
With Toys R Us and Maplin being the most high-profile failures, we have also seen struggles from Carpetright who have found it difficult to adapt to the changing nature of the market. Weak consumer spending and online rivals are the main cause, as House of Fraser have seen, as their parent company has recently posted a £44 million loss.
When large companies fail, they leave huge lists of creditors. Larger organisations quite often dictate the credit terms they are offered by their suppliers, most of which are SMEs. The fall out for SME businesses is that they are in effect financing the larger organisations. The credit terms support the cash flow for the bigger businesses, provide time to sell the product and in turn help support further growth. When the large organisations fail, the major sufferers are the unsecured creditors and what is certain should this occur: they will not be paid.
With the failure of numerous businesses, the level of bad debt owed by retailers to suppliers has more than doubled this quarter compared with the previous one. If smaller businesses further down the supply chain do not have trade credit insurance, they will be at risk of taking on huge potential debt. The risk of a domino effect is significant. Companies that are not immediately dealing with the failed company but with their supplier could suffer. This knock-on effect can result in a whole chain of companies struggling or at worse failing altogether.
Solutions not Problems
At CMR we find solutions to problems. We support all our clients and potential clients by helping them through the maze of the business world using up to date information on their customers. Our managed trade credit insurance policy serves ultimately to protect your business from the risk of a bad debt and from destabilising your business. CMR’s support and knowledge aid your credit control, and in turn increase the growth and profitability of your business.
Do not wait to suffer bad debt before making contact. You want your business and the economy to thrive and that starts with calculated risk. Once you get in touch with us we can let you know the huge number of benefits of trade credit insurance. Our friendly experts will be more than willing help.