33% of Bulgaria SMEs Close to Bankruptcy Due to Intercompany Indebtedness

Business | June 27, 2013, Thursday // 16:18|  views

A report of the Bulgarian Academy of Sciences (BAS) showed 33.2 % of small and medium-sized enterprises (SME) in Bulgaria to be on the verge of bankruptcy due to intercompany indebtedness.

Meanwhile, 51% of companies in Bulgaria reported deterioration in financial indicators in 2009 and in 2010, according to a survey presented by Prof. Radka Ilieva at a public lecture on June 26, as cited by econ.bg.

The number of small companies reporting a satisfactory development dropped four-fold from 2009 to 2011.

The main problems outlined by managers of SMEs were the reduction in consumption (68% of the polled) and the increase in intercompany indebtedness (54%).

Ilieva explained that intercompany indebtedness most often hit small companies but it also affected big firms.

She argued that big firms were not eating up small enterprises, just as "bears do not eat rabbits," adding that every sector needed big and small players, alike.

The sectors of construction, services, trade, light industry, and tourism, were worst affected by the economic crisis, with prospering construction firms decreasing three-fold in one year (2012).

The tough economic situation led to a reduction in innovation spending, variations in quality, decreased profit margins and decreased promotion and advertisement expenses.

"Promotion and advertising are tremendously lagging behind in Bulgaria and do not match the sector characteristics and the remaining part of the marketing mix," Ilieva said.

She cited underdeveloped consultancy services as another major problem, adding that 70% of big companies in Bulgaria made decisions on the basis of average concepts about the activity of the competition.

Ilieva said that companies in Bulgaria were not particularly willing to spend on consultancy services.

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Tags: economic crisis, intercompany indebtedness, BAS, Bulgarian Academy of Sciences, small and medium-sized enterprises


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