SME growth threatened by ‘unpaid debts’

Over three quarters (75%) of a small and medium-sized business (SMEs) have written off unpaid debts in the past year, according to research from Amicus Commercial Finance.

The report found the average amount written off by UK SMEs in the last year was £11,708, representing just under £50bn in written off debts or £134m every day.

According to the study, which surveyed 500 small business owners, medium-sized businesses with between 50 and 249 employees are the worst affected by delayed payments with a quarter (24%) of invoices remaining unpaid after their debtor day period, or not at all.

Medium-sized businesses lose an average £33,750 a year through unpaid debts.

One in five (18%) of SMEs said they had lost contracts due to cashflow problems, and in order to mitigate the impact of late payments a growing numbers of SMEs said they are turning to invoice finance to secure reliable cashflow.

Some 8% of firms said they currently use invoice finance, and an additional 19% of business owners plan to use it in future – including 11% in the next 12 months.

John Wilde, managing director, said: “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.”

The research also found the biggest challenges caused by cashflow shortages included paying suppliers (41%), meeting debt repayments (30%), buying inventory (29%) and paying staff (24%).