‘Bad debt’ costs small business billions
Nov 01 2006
The time spent chasing late payment and the effect of dealing with ‘bad debt’ - unpaid invoices and monies outstanding to your company - is costing small businesses an estimated 286 million man hours and nearly £3.6 billion per year, says new research from Bibby Financial Services.
The survey revealed that despite rising business failure rates, SMEs are still failing to adequately protect themselves from bad debt, with 47 per cent reporting they have no provision in place should an unpaid invoice or unexpected debt arise.
Of the owners and managers that have planned for bad debt, 34 per cent rely purely on the threat of legal action, 27 per cent would use their bank overdraft facility, while 15 per cent plan to cover the shortfall from their personal savings. This means any unexpected problems would hit cash flow hard and put immediate pressure on the business.
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.’
Click here to read our guide on how to keep cash flowing and how to manage funds.
There are currently no comments on this article
Comments