Rise of the zombies

Sounds scary, doesn’t it? And sort of seasonal too, being that we’re so close to Halloween. But, while these ‘zombies’ may once have been living, thriving businesses, now they’re in debt and bringing in only enough money to just keep going. Their danger isn’t so much in being walking undead, but that, if you end up doing work for them, you run the risk of not getting paid – or spending a lot of energy getting your money out of them.

The latest figures based on research by Begbies Traynor Red Flag Alert, which monitors the finances of UK businesses, was published on 19 October. It shows that there has been a leap of 10.5% in zombie SME businesses in the north of the UK, while those in the south, as well as larger companies, have actually shown financial growth. This north/south divide shows up again in what is called ‘combined distress’, which describes companies who are having ‘significant’ or ‘critical’ financial problems. Southern businesses have seen a 7% decrease in combined distress, while the rest of the UK has seen an increase of 9%.

“These figures demonstrate that an increasing number of SMEs are bearing the brunt of the current challenging credit and trading conditions,” says Julie Palmer, a partner at Begbies Traynor. “Unfortunately, the outlook for many of these SMEs is poor. These zombie companies are only just generating sufficient cash to pay the interest on their debts and keep creditors at bay. Whilest many of htse SMEs may survive with the benefit of low interest rates and creditor forearance, theya rein no position to deal with unexpected costs, lost orders or bad debts, or to fund increases in working capital and invest in growth.”

For freelancers, it’s pretty clear that it makes sense to do a little homework before taking on new clients and to keep an eye on existing ones. And keep close tabs on payment of invoices – it makes sense to make sure everyone is paying in a timely fashion.

By Liz Granirer