SME VARs must tighten credit belts

e-bcm warns smaller channel players to clamp down on bad debts before the problem becomes unmanageable

Credit checking and financial management service e-bcm has warned channel firms to tighten up their credit lines to avoid a growing risk of bad debts.

e-bcm’s warning follows a report by market watcher Ernst & Young, that revealed there were just under 400 profit warnings from UK firms in 2007 – an increase of 10 per cent on 2006.

The organisation said the threat is particularly high for smaller firms as they, typically will be owed smaller individual amounts.

Dennis Scott, commercial director at e-bcm, said: “Small firms will usually be owed less than bigger suppliers in terms of individual amounts outstanding with any single customer but that does not mean they are less vulnerable. In fact, they are likely to be in a much more fragile position than larger firms that are able to obtain extended overdrafts with the banks. Most small businesses could not cope with more than two or three serious bad debts and with profits falling and lower levels of economic confidence, we’re likely to see many more businesses running into trouble in the coming year.”