SMEs see 127pc rise in value of bad debt
Small- to medium-sized enterprises (SMEs) have seen the value of bad debt surge by 127 per cent over the past six months.
According to new research from Bibby Financial Services, UK-based SMEs have been forced to write off an average of nearly £40,000 each in unpaid invoices in the last 12 months, up from an average of £17,500 in March 2024.
40 per cent of SMEs said that they have suffered from such non-payment in the last year, up from 30 per cent in March.
Bibby has warned that late and non-payment could lead to “considerable” supply chain pressure, and has called on the government to offer more support to SMEs.
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“This is a supply chain disaster waiting to happen for SMEs, as well as a huge economic leakage,” said Jonathan Andrew, chief executive of Bibby Financial Services.
“While late payment is a known challenge, bad debt, where unpaid invoices are written-off entirely, is a hidden assassin that can wreak havoc through SME supply chains.”
Bibby’s data also found that 58 per cent of SMEs have seen at least one of their suppliers go bust in the past few months, while a similar number (56 per cent) said that they have experienced the insolvency of at least one customer.
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“Measures announced by the government such as the Fair Payment Code are welcome, but the reality is that it’s not only larger businesses that pay late,” added Andrew.
“Many small businesses do so through necessity or to preserve cashflow to make critical payments, so we really need to be looking at how to inject working capital into supply chains sooner to insulate smaller businesses, as well as reducing payment times.
“It’s also critical that government measures draw the distinction between late payment and the lesser understood issue of bad debt due to non-payment or protracted default. This can so often be devastating – not only to the creditor, but to those businesses within their supply chains.”
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