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 cash flow 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%)

Quote from Nigel Holland:

“Debts are often unavoidable, and are part of the  market operations of many SMEs. Problems arise when these debts remain outstanding after a period of time. Good credit control is very important however various factors some time lead to many SMEs writing off debts.

Therefore, it is vital that SMEs are properly protected, for example they could consider being insured for the loss of earnings incurred by the other parties’ failure to fulfil their contractual agreement.

Furthermore, SMEs need to be aware about any options of legal redress available to them, in pursuance of the debt.”

Talk to a member of our team today about  how we can advise you on managing cash flow.

www.hollandandcompany.co.uk