Suppliers to the retail sector must take urgent steps to protect themselves against bad debts following the collapse of department store chain Allders and a warning from the UK's accounting watchdog.
Atradius, a leading global credit insurer, warns that businesses supplying the retail sector could be vulnerable to late payments and unpaid bills because of the current tough trading conditions in the marketplace.
Atradius says the collapse of Allders shows that even the most established of companies can suffer from major financial problems.
Tony Garner, Industry Development Manager for Atradius, said: "It is a tough time for the retail sector at the moment, but the signs are not always easy to read. Tesco has been enjoying fantastic sales whereas other well-know names, such as Allders, have been suffering.
"Suppliers must minimise their risk by credit checking their customers, getting guaranteed payment terms and taking out credit insurance to protect themselves against any bad debts if a company cannot or will not pay."
News that the 150 year old Allders chain has been put into receivership comes just a month after the Financial Reporting Council (FRC), the UK accounting watchdog, named retail amongst five industry sectors it said it would be keeping a close eye on over the next 12 months.
Although the FRC did not identify specific concerns with the retail sector, the body said its decision to monitor the accounts of retailers was based on a risk assessment that took into account trading conditions amongst a number of other factors.
Although consumer spending was relatively high during 2004, the impact of interest rate increases towards the end of the year meant that many retailers experienced a disastrous Christmas trading period, usually their busiest time.
Last year furniture retailer Courts went bust, leaving many customers high and dry and unable to collect the furniture they had already paid for.
After a poor festive period the French owners of clothing chain Etam admitted they might have to sell off their loss making UK stores.
The FRC named five industry sectors it will be monitoring during 2005, including automobile, pharmaceutical, retail, transport and utilities.
Atradius offers a range of credit management services, ranging from credit insurance, which protects companies against the risk of bad debts if their customers cannot or do not pay their bills, to credit checking and debt collection services.