Don't let failing firms derail your own business
The number of people out of work in the UK has risen to its highest level in 14 years. Unemployment topped 2.47 million in the three months to July.
As a result, more people are starting up in business on their own then ever before. Figures from Barclays showed that 437,000 new businesses were started in 2008, up from 432,000 the previous year.
But record insolvency figures released last month show that even if you make a success of working for yourself, you could be hit by unpaid invoices from other companies going bust.
Nearly 1 per cent of companies went into liquidation in the 12 months to June 2009. And for every company that fails, a trail of unpaid creditors is left behind. The Professional Contractors Group (PCG), which represents and supports contractors and freelancers, said conditions were tough enough without the added strain of invoices going unpaid.
For software contractor Sandeep Sirah, experience and goodwill counted for little when things went wrong. What began as a 90-day outstanding payment took more than 120 days to be recovered. The company Mr Sirah was dealing with had cash-flow problems. With the help of debt recovery firm Creditsafe, Mr Sirah was able to recover all the money owed to him. Others have not been so lucky.
One self-employed technical consultant had checked out the financial position of the company he was due to advise before he started work for them in Tanzania. However, his payments didn't arrive and he got nowhere when he pressed for payment. Finally, he flew back to the UK and refused to return until he was paid.
"I realised the organisation was sinking. My only course of action was to stop providing the service," he said. "I got some money back via a debt collection agency but nowhere near all of it."
The PCG publishes guidance for its members explaining the common warning signs of struggling businesses. They include issues such as payments being late; difficulty contacting key personnel; a request for a change in business terms; phone and/or website problems; low staff morale and high staff turnover.
Barclays Bank offers small businesses – whether or not they are customers – a free credit checking service on would-be clients. The Government's own businesslink website (businesslink.org.uk) also has tips. Companies House provides company accounts.
"You have to be careful with start-ups," said Sid Home, the managing director of Creditsafe. "Limit your exposure, shorten your payment terms and build up a picture of how the business is being run."
If the new business is a limited company, it is easy to identify who the directors are and their history of running previous businesses. If they are limited companies, find out what paid-up share capital has been put in by the directors.
- 1 Breaking the Silence: In the reality of occupation, there are no Palestinian civilians – only potential terrorists
- 2 Special Report: US troops are stationed in Japan to protect the nation. But to sex workers in Okinawa, they bring fear, not security
- 3 Should we intervene? Our response to the Charles Saatchi and Nigella Lawson assault is shocking too
- 4 Exclusive: Cristiano Ronaldo advised to stay at Real Madrid for further 18 months before making possible switch to Manchester United
- 5 Iran to send 4,000 troops to aid President Assad forces in Syria
iJobs Money & Business
£65000 - £85000 Per Annum: The Green Recruitment Company: The Green Recruitmen...
£400 per day: Orgtel: A top tier banking client urgently requires a Senior Bus...
£250 - £350 per day: Orgtel: Financial Crime Analyst,Midlands, Banking, AML/Sa...
£20,000 - £45,000 OTE: Co-Venture: Working for this company will give you a ch...
Day In a Page
A smartly presented two-bedroom cottage, extensively refurbished with sun-filled garden and terrace, £350,000
A Victorian barn conversion at Heath End Farm with four bedrooms. £1.25 million.
A spacious two-bedroom flat within an impressive Victorian terrace building, close to Fulham Road and New Kings Road, £375,000.
A two-bedroom flat at Grafton Court, a former manor house in the village of Temple Grafton, with private terrace, £450,000
A four-bedroom listed mews in Apley Castle with impressive drawing room, £425,000
A two-bedroom flat close to the Regent's Canal with a private patio and a concierge service. £500,000
A two-bedroom flat at the Candlemakers Apartments set over two floors with a balcony. £625,000.
This three-bedroom Grade II-listed thatch in the pretty village of Wigginton. £450,000.
A new two-bedroom flat with a bright open-plan reception and skyline views. £450,000.
A modern home of almost 1,000sq ft is close to Stoke Newington's high street. £499,950
A five-bedroom bungalow in Hoveton with riverside garden and mooring dock, £550,000
A refurbished one-bedroom flat with south-facing reception and high ceilings. £579,950
A four-bedroom Grade II-listed house in Nazeing with large gardens. £550,000
A modern four-bedroom house in a converted stable within walking distance to Peckham Rye. £695,000
Three-bedroom house in a quiet residential area within close distance to Battersea Park. £450,000
A three-bedroom cottage within commuting distance of London, Norwich and Cambridge. £250,000
A two-bedroom cottage with a sun room and gardens in South Chard. £350,000.
A three-bedroom semi-detached house with original features including fireplaces and wooden flooring. £399,950
A modern two-bedroom flat split across two floors and close to several public transport links. £595,000