The latest statistics from the Department for Trade and Industry suggest the number of business insolvencies in the UK is increasing.

Britain's bad debt is bad for business and has a huge impact on the UK economy.

There were 4,323 company insolvencies in England and Wales in the last quarter of 2002.

This was an increase of 11.1 per cent on the previous quarter and an increase of 14.9 per cent on the same period a year ago.

The more businesses fail, the greater the threat of bad debt to existing firms.

Venture Finance, which is based in Haywards Heath, said for small firms, protection against bad debt can be the difference between success and failure.

Venture Finance offers bad debt protection as well as factoring and invoice discounting services, which uses the value of outstanding invoices to release working capital back into a business.

Bad debt protection means if a credit-approved customer fails to pay an undisputed invoice, Venture will credit the client company with the amount of the debt.

One company that has benefited from the service is Portsmouth-based Hushon, which distributes air conditioning systems.

Hushon has regularly suffered from late or non-payment from clients since it was established 15 years ago.

Tony Martin, managing director, said: "The kind of firms we deal with tend to be relatively small mechanical service contracting companies.

"When the end of the year comes, any profits are generally divided among their shareholders, leaving little for when things aren't going so well.

"As such, a number of our contractors have gone under, owing us considerable funds.

"The worst year we ever experienced was during the early Nineties.

"Our factoring and credit protection fee paid to the invoice financier one year was about £32,000, the money provided through bad debt protection was £44,000."

Alwyn Ellis, Venture Finance's regional manager, said: "In times of economic uncertainty, businesses are likely to experience more working capital difficulties, with late or non payment and bad debt destined to escalate."

Stamping out late payment is one of the key messages of the National Small Business Week, which started on Monday.

The Better Payment Practice Group (BPPG) is encouraging firms to adopt a responsible attitude to paying on time by signing up to and following its code of practice.

Nearly 1,400 businesses, representing about 20 per cent of the UK's gross domestic product, have already signed up.

Firms can sign up to the code on the BPPG's web site at www.payontime.co.uk which also contains other useful credit management information, including free guides and letters.

Wednesday April 30 2003