The country’s small-to-medium (SMEs) size enterprises are being urged by credit bureau Veda Advantage to step up their risk assessment processes as they battle to stay in business.
Figures held by the company reveal that only five percent of SMEs conduct proper risk assessment which includes an assessment of creditors’ ability to pay.
The Managing Under Recession report, which surveyed 1539 SMEs from industries including IT, found many owners relied on personal savings to back up their balance sheets since the recession began.
Veda Advantage managing director John Roberts says that without risk assessment in place businesses will find it difficult to obtain credit from mainstream lenders.
“The days of relying on personal connections when it comes to advancing credit for products or services are well over - to stay in business companies need to know just how credit worthy their clients are and whether they can actually pay their bills,” Roberts says.
“Thanks to the recession banks have limited lines of credit so they want to know when they lend to a SME that the company has robust business practices in place – and that starts with risk assessment.”
Veda Advantage data shows a 29 percent increase in the number of defaults in July 2010 compared with the same month last year.