The issue of unpaid invoices is one still affecting small and medium sized businesses as new research has found that more than three-in-four (76%) have written off unpaid debts in the past year.
According to research by flexible working capital provider Amicus Commercial Finance, the average amount written off by UK SMEs in the last year is £11,708, representing just under £50bn in written off debts, or £134m every day.
The study, conducted among 500 small businesses owners, has revealed that 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 – firms of this size lose an average of £33,750 a year through unpaid debts.
One-in-five (18%) SMEs said they had lost contracts due to cashflow problems and in order to mitigate the impact of late payments, growing numbers of SMEs are turning to invoice finance to secure reliable cashflow. While 8% of firms said they currently use invoice finance, an additional 19% of business owners plan to use it in future including 11% in the next 12 months.
John Wilde, managing director of Amicus Commercial Finance, commented: “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.
“We have taken a fresh, tech-driven approach that builds on some of the lessons learned in the fast growing alternative finance sector. Here at Amicus Commercial Finance, we combine deep sector experience with a high-touch personal service and cutting edge technology to make the process as straightforward and efficient as possible.”
According to the research, the biggest challenges caused by cashflow shortages included paying suppliers, cited by 41% of business owners, meeting debt repayments (30%), buying inventory (29%) and paying staff (24%).
