Information gap does for record number of firms

A big rise in the number of negative company announcements reveals a worrying information gap that could bring down many small and medium businesses, credit information company Equifax has warned.

The number of company profit warnings, redundancies and major restructurings hit 1,385 in the quarter to June 2006 – the highest recorded figure since March 2003, according to accountancy firm KPMG .

Equifax external affairs director Neil Munroe said the high level of warnings should alert businesses of all sizes to be more vigilant in monitoring the credit ratings of customers and suppliers.

Most large companies should be identifying and reporting key risks as part of financial compliance activities.

“Companies don’t do enough monitoring,” said Munroe. “If they have a relationship with the customer and they are being paid, they assume there no issues. But there are warning signs, such as a change of directors, county court judgements being posted, the posting of accounts or even a change of offices.”

KPMG advised companies to be ready to act on the information they were receiving through customer and supplier monitoring.

Philip Davidson, KPMG’s head of restructuring advisory, said: “The businesses that flourish will be those that keep a close eye on their finances and react quickly to changes in market conditions.”

Munroe said that Equifax offered a predictive alerting service for business.

“Credit analysts look at information over a period of time, look at companies that have failed, and build an idea of what information is predictive. It is a classic example of the power of information,” he said.