82% of SMEs still have outstanding balances from their debtors, with the average owed estimated at £62,957, according to research by Direct Line for Businesses.
When asked about writing off unpaid debts in the 2015/16 tax year, 19% of the 728 SMEs surveyed said that they had written off debts worth an average loss of £31,000.
9% of businesses claimed that they have written off debts of over £100,000.
40% claim they are unaware of how much money they are owed by their debtors, emphasising the importance of cashflow management for smaller businesses.
The most common reasons for writing off unpaid debts:
- customer/supplier was insolvent so couldn’t pay money owed (29%)
- supplier didn’t have sufficient funds to pay the debt owed (17%)
- business didn’t have time to chase debts owed (11%)
- business lacked funds to chase up debtors (11%)
- damaging relationships with suppliers/customers (10%)
- unaware of reclaiming money owed (3%)
Nick Breton, head of Direct Line for Business, said:
“SMEs should ensure that they are fully aware of all legal avenues designed to help them recoup all of their owed monies.
“In addition, they should ensure they have the correct insurance in place to account for any loss in earnings that may come about if and when a client or supplier is unable to fulfil their financial obligations.”