Member Article

UK businesses losing billions to bad debt

Small businesses in the UK are losing nearly £3.6 billion a year dealing with bad debt, according to new research. An estimated 286 million working hours are also being wasted chasing late payments.

The survey, carried out by Bibby Financial Services, reveals that SMEs are failing to adequately protect themselves from bad debt, with nearly half reporting that they have no provisions in place should an unexpected debt arise.

Of the owners and managers who say they are prepared for bad debt, a third rely purely on the threat of legal action, a quarter would use the overdraft facility provided by their bank, while 15% plan to cover the shortfall from their personal savings.

David Robertson, chief executive of Bibby Financial Services, said: “It seems that far too many owners and managers are burying their heads in the sand, hoping that dealing with late payers and bad debtors will not happen to them. Unfortunately, however good the relationship with suppliers and contractors, the reality is that chasing payment and dealing with bad debt is a fact of business life which can strike any business at any time, however unexpected.”

Mr Robertson urged owners and managers to consider the impact of being on the receiving end of a late payment or a bad debt, and how the systems they have in place would allow them to cope with it.

“Given that a lack of foresight and planning could lead to a real threat of business failure, reviewing provisions in place should be a matter of priority for small business owners and managers across the country.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .