With the tough economic climate predicted to continue well into 2012, Coventry Business Recovery Specialists, Cranfield, are warning companies to pay greater attention to their business relations with both customers and suppliers.

The Organisation for Economic Co-operation and Development (OECD) have speculated that a weak demand for exports is a prominent contributor to the economic storm, and the abundance of zombie companies in the UK is now starting to cause concern particularly with regard to working capital being allocated inappropriately.

Tony Mitchell, managing director of Cranfield Business Recovery, said: “It is generally accepted that the only way we are going to get out of these financial doldrums is through exports but viable companies are unable to fund the overseas market development and growth activity as long as they are denied working capital. With the Government encouraging HMRC and banks to support zombie companies through “time to pay” schemes it is currently maintaining a veneer of hope and optimism even in these times of distress. The reality is likely to bite hard in 2012, however, when there is likely to be an increase in companies being pushed towards insolvency.”

Cranfield have been advising companies in the Midlands to watch out for signs of distress and to take note of all the warning signs that insolvency may be looming. These include redoubling credit control vigilance, reviewing customer concentration and talking to members of staff of uncertain companies to see if there is any employee unrest; all of which are indicators of businesses struggling to maintain control.

But it is not all doom and gloom for directors of zombie companies. If they take action to seek professional advice, they can explore the options open to them and what solutions may be available.

Tony added: “If we are to get the economy in the UK back on track, it is important that focus is shifted to directing working capital to viable companies and not to companies that are already experiencing financial distress and which are beyond being able to be turned around.”

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