Writing off unpaid debts threatens small business growth

More than three quarters of small and medium-sized businesses in the UK have been forced to write of unpaid debts in the past year, new research has revealed.

Amicus Commercial Finance found that 76% of firms had to take action, with the average amount written off totalling more than £11,700.

It means that slightly less than £50 billion was written off in the last 12 months, equating to £134 million every day.

Late payments have long been identified as a major problem for small businesses, but even Britain’s self-employed are facing difficulties – they are losing £8.1 billion a year as a result of having to give up on chasing unpaid invoices.

Some 500 small business owners took part in the survey and those firms with between 50 and 249 staff were found to be worst affected by late payments.

A quarter of invoices remained unpaid with these firms losing an average of £33,750 annually through unpaid debts as a result.

One in five businesses that they had missed out on contracts as a result of cash flow issues, which severely limits their growth potential.

Alternative finance options do exist to aid those facing difficulties, with 8% of firms turning to invoice finance to secure a reliable cash flow, while a further 19% of business owners suggested they intend to use it in the future.

Such financial options may also be used to strengthen the position of a company ahead of a potential merger or acquisition, while an insolvency practitioner can provide useful advice and insight to ensure the best outcomes are reached.

For small businesses, the biggest challenges that result from cash flow shortages were paying suppliers, noted by 41% of owners and meeting debt repayments, an issue for 30% of firms.

Buying inventory and paying staff were also listed as challenges by 29% and 24% of business owners respectively when they did not have a steady flow of finance.

By Phil Smith

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