Suppliers asking to see management accounts
Businesses being asked to share detailed financial information
Small businesses are increasingly being asked to share their management accounts with suppliers following requests from trade credit insurers, research has shown.
According to research from CreditPal, more than 670,000 small and medium-sized firms were asked to provide their management accounts to suppliers in the last 24 months, on the insistence of trade credit insurers.
The research found that 77% of small and medium-sized businesses were able to secure trade credit or extend existing credit facilities over the past two years after complying with such a request.
More than 47,000 had credit facilities cancelled or denied after refusing to share financial information, CreditPal said.
Chris Poll, CEO of CreditPal, said trade insurers are increasingly looking to source intimate financial information about their clients’ trading partners.
“Insurers and businesses are adopting new strategies for financial risk mitigation to ensure they minimise their exposure to bad debt and defaulted payment,” he said.
“Financial directors are increasingly coming under pressure to supply real time updates regarding a trading partner’s financial status to satisfy compliance requests from their credit trade insurer. Annual report data that could be over 18 months old filed at Companies House is no longer deemed sufficient.”
Philip King, chief executive, Institute of Credit Management, added: “Trade credit insurance plays a vital role for small and medium-sized businesses in particular and it is clear that insurers will be more inclined to write cover and maintain limits given greater financial disclosure.”
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