Recent studies have shown that more than a quarter of Small and Medium Enterprises (‘SMEs’) in the UK suffer from bad debt. Indeed, in the last financial year, a staggering £5.6 billion of debt was written off across Britain.
One report – undertaken before the EU Referendum – revealed that 27% of SMEs had written off money in the previous year. That equates to more than 1.4 million SMEs suffering from bad debt, with the average amount being lost by each business due to customers not paying being £11,829. SMEs in the construction sector was one of the worst-hit industries, with an average write-off of almost £15,000 over the past year. In another study of 728 companies, it was revealed that the average outstanding balance of a business’s debtors was in the region of £63,000.
Non-payment of debt can occur for a number of reasons; these include customer insolvency, invoice dispute, not wishing to ruin a customer relationship, lack of time and even lack of knowledge on how to collect a debt. In fact, 29% of the respondents to one of the studies cited customer insolvency as the biggest reason why debts had been written off.
If they’re not monitored, bad debts can lead to delayed investments plans, staff cuts and, at worst, insolvency. So if your business is affected by the issues raised in this article, then a confidential discussion – at an early stage – with an experienced and qualified specialist to talk through the range of options available, may well be an appropriate course of action. Please contact us if you would like an initial consultation, free of charge