For entrepreneurs, forming a company is one form of expressing optimism that their business idea is something that will be supported by the market place. So it is a sobering thought to hear that a lot of businesses have been folding up this year.

According to a new report released recently, the number of companies that have closed shop rose during the third quarter of this year.

Based on the latest insolvency data released by global information solutions company Experian, it showed that business failures rose by 21 per cent compared to the same period (July to September) in 2004. The posted figure was nearly double that of the rate that was recorded in the first three months of this year.

About 4,787 businesses shut down in the third quarter, 833 more than the figures posted in the third quarter of 2004. In total, about13,599 companies have permanently closed shop in 2005.

Experian has advised business owners and entrepreneurs that a good way to minimise the risk of business failure is to do business information checks on customers (both new and existing) and suppliers so that they can reduce their exposure to bad debts that are considered to be the most frequently cited reason for business failures.

Business solutions experts agree with the advice given by Experian. According to them making the necessary checks on suppliers, customers and business prospects, will forewarn business owners if some of them are faced with cash flow problems and are on the verge of failure.

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