Bad debt is a continuing problem for a large number of small businesses. That’s the finding of a new survey from finance provider Bibby Financial Services. Its latest research reveals that more than a quarter of SMEs have been forced to write off bad debts, with 27% of SMEs having written off money in the past year.
The average amount scrapped by each business due to customers not paying invoices was £11,829, and was described by BFS Global chief executive, David Postings as “A chronic problem for SMEs [which] can lead to staff cuts, delayed investment plans and – at worst – insolvency.”
Waiting times fall slightly
A closer look at the research reveals that the sectors most severely hit the transport (30%) and construction (29%) sectors were worst hit, with construction businesses writing off almost £15,000 on average over the past year.
Encouragingly, the amount of time spent by SMEs waiting for payment has fallen slightly from 40 to 38 days, but the figures do show that more than 1.4 million SMEs are still suffering from bad debt.
“Non-payment can occur due to customer insolvency, payment default or dispute and the issue is particularly problematic in industries where raw materials and labour costs have been paid up front,” Postings said. “The construction sector is particularly prone to the effects due to the nature of billing and notoriously lengthy payment terms.”