Businesses are advised to safeguard issued invoices with credit insurance

Corporate insolvencies in Q4 2010 continued to decrease according to the latest figures from the Insolvency Service.

The statistics showed there were 3,955 compulsory liquidations and creditors’ voluntary liquidations in total in England and Wales in Q4 2010.

Although this represents an 11.3 per cent decline on the corresponding quarter in 2009, the figures are only down 0.2 per cent from Q3 2010.

This slowing rate has prompted fears that, along with rising VAT rates, a predicted interest rate increase and public sector cuts, insolvency numbers will rise again in the second half of 2011.

Martin Walmsley, head of debtor insurance at Lloyds TSB Commercial Finance, said: “Overall, the number of businesses declared insolvent in 2010 was nearly 16 per cent less than the previous year’s figure, showing that the improving economy and increased opportunities has had a positive effect on the market.

“However, the rate at which insolvencies are decreasing is slowing down, which means it is vital to emphasise the importance of keeping a very close eye on outstanding debtors and carry out credit checks on potential new customers.

“A healthy cash flow is the most important asset for any company and in this economic climate it is essential for firms to protect themselves against every eventuality. A large customer being declared insolvent can have a devastating knock-on effect on a business.

“Credit insurance policies, such as Lloyds TSB Commercial Finance’s debtor insurance, can safeguard a company from up to 90 per cent of the value of a bad debt suffered as a result of customer insolvency and should be considered essential for firms wishing to grow in 2011.”

There were 1,200 compulsory liquidations in Q4 2010, this is an increase of 5.8 per cent on the previous quarter. Conversely, creditors voluntary liquidations, which totalled 2,755, decreased by 2.6 per cent on the previous quarter.