Clearly reflecting the current pressures affecting businesses of all sizes, Equifax has also seen an almost 200% increase in alerts for Gazette and Detrimental information. These are reports that indicate a court or other negative action against a business and are a good early warning sign of potential repayment problems for other creditors.
The other area where Equifax has seen a significant increase in reports taken is for credit information that provides a greater insight into the people behind non-limited businesses such as sole traders and partnerships. This has increased by over 100% in the last 12 months and suggests that many organisations are recognising the value of understanding the financial circumstances of the people running a business. This will be particularly relevant if it's a new start-up.
Neil Munroe, external affairs director for Equifax comments, "It's very encouraging to see businesses taking positive steps to stay on top of the financial status of customers and suppliers with our monitoring tools. Rigorous credit checks are also crucial to help businesses protect cash flow and guard against bad debt. They are essential when taking on new customers.
"In times when new credit is difficult to come by and banks are reducing or even recalling debts, there may be a temptation to cut spending on basic processes and disciplines. But when times are tough cutting back on checks could be a false economy."
Following Equifax's report of an almost 40% year on year increase in business failures in Quarter 2, it is crucial for companies to remember that not all business is good business. Even in a stable economy it may only take one or two important customers going bust to jeopardise a company's own financial standing. Yet it only takes a few simple credit checks and ongoing monitoring of key customers to help a business protect itself against bad risk and secure a good financial future during and after the recession.