One in five small companies do not have a credit checking system in place when they take on new business, according to research by Callcredit Direct.

The research also revealed that 25% of firms are not checking new businesses credit ratings, as they believe that it is too time consuming, despite the increased danger in the recession of firms defaulting on payments.

"In a climate where more businesses are tightening their purse-strings, it is worrying to see that many companies still do not understand the benefits of having a credit checking service in place. It costs businesses millions of pounds a year in lost revenue and profit," said Helen Mann of Callcredit Direct.