Try to conceal your surprise: apparently, small businesses in the UK aren’t doing enough to ‘identify high-risk customers’, according to research by City regulator the Financial Services Authority. In fact, only 40% of small firms visited by the FSA have ‘effective monitoring systems’ in place to warn them if a dubious punter comes along, says the report.
But given the majority of small business owners pride themselves on studiously avoiding terms like ‘effective monitoring systems’, it’s not particularly shocking news – but nevertheless, the FSA says only nine of the 17 firms it visited had formally made an attempt to prevent issues such as late payment or fraud from affecting their business.
The report highlights a fundamental disjuncture between two approaches to risk: the process-led one as expressed by the FSA, and the rather more fluid and informal one chosen by many SMEs. And it's by no means clear that the former is always better than the latter - SMEs can't afford and don't need masses of process, ansd may in many cases be better at spotting ad-hoc risks than big firms which do tick all the boxes. One thing's for sure, with 80% of small businesses having reported an increase in late payments over the past six months, this is a problem which isn't going to go away any time soon.
Even those smaller firms which do want to do more due diligence will struggle to get funding for it - banks are still deeply suspicious about opening up any credit lines, and the Euro crisis isn't going to make that easier. The final nail in the coffin is the fact that the FSA is about to undergo a radical transformation as it merges with the Serious Fraud Office. Who is going to pay any attention to what it has to say until the dust settles on the new regime?
As far as getting money out of reluctant customers is concerned, we would like to point out that if all else fails, the old ‘go and sit outside the CEO’s office until they hand over a cheque’ method tends to work for all but the most persistent offenders…