SMEs hit a wall as three quarters are made to write off unpaid debt

posted by 2 weeks ago in News
SMEs hit a wall as three quarters are made to write off unpaid debt

Just over three-quarters of UK SMEs have had to write off their unpaid debts over the course of 2016. The average amount brushed off by one business is £11,708 equating to £134 million everyday of unpaid debts.

A study carried out by small business owners found that businesses within the medium-sized sector have pulled the short straw when it comes to unpaid invoices, it is estimated that companies of that size are losing approximately £33,750 each year.

If unpaid invoices weren’t bad enough, businesses are also having to cut ties on contracts due to their cash flow issues. For a lot of businesses, they have had to turn to invoice finance just to obtain a trustworthy source of cash – 8% are currently using invoice finance whilst 19% are planning to use it in the near future which 11% believe it will be in the next 12 months.

Managing Director of Amicus Commercial Finance, John Wilde comments;

“Our research shows that not only is there a reliance by many UK SMEs on clients’ invoices being paid within the debtor day period, but that despite this, significant amounts of debt are being written off due to non-payment. Given this, it’s understandable that business owners are increasingly turning to invoice finance as a way of converting unpaid debts into instant working capital.

According to the study, it found what businesses feel their biggest threats are when it comes to their cashflow;

41% – paying suppliers

30% – debt repayments

29% – purchasing inventory

24% – paying wages

Laura Thomas, Head of Business Finance at Businesscomparison.com comments;

“Even just one unpaid invoice can be as dramatic as making or breaking a business, so it is very worrying that over 75% of businesses are faced with this predicament.

“It is important that businesses have robust collection controls in place and follow these to the letter to ensure money owed is recovered in a timely manner. Invoice factoring can be a good option for some companies who don’t have the credit controls, time or resource for collecting as the banks can take it over for them and collect the debt on their behalf whilst advancing some of the debt owed.”

If you are struggling with unpaid debt and are thinking of taking out invoice finance, then compare here today to find the best rates. We are here to help.