Liabilities - firms worry about what they owe

An interesting piece of research from R3, the association of business insolvency practitioners, on the problems of corporate debt. R3 have found that one in five businesses (19%) are worried about the amount of debt they currently owe to their creditors.

The research, which explores the financial position of businesses in the UK, reveals that smaller businesses owe on average around £110,000 to the bank, £82,000 to trade creditors and £27,000 to the Crown (e.g. HMRC for VAT,.Income Tax Corporation Tax).

Yet it is debts owed to trade creditors that in fact cause the most concern. A third of all businesses (32%) say they are worried about the amount they currently owe in trade debts; while 24% are worried about finance, overdraft and banks loans; and 18% are concerned about Crown debts.

A good exercise for students would be to consider why the relationship with trade creditors is so important? Why are business people worried about owing suppliers too much and less concerned about the tax man?