SME growth threatened as three in four are forced to write off unpaid debts

Over three quarters (76 per cent) of small and medium sized businesses (SMEs) have written off unpaid debts in the past year, according to new research by Amicus Commercial Finance.

The specialist provider of flexible working capital to SMEs found that the average amount written off by UK SMEs in the last year is £11,708, representing just under £50 billion in written off debts, or £134 million every day.

According to the study conducted among 500 small businesses owners, medium-sized businesses with between 50 and 249 employees are the worst affected by delayed payments with a quarter (24 per cent) 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 per cent) SMEs said they had lost contracts due to cashflow problems. In order to mitigate the impact of late payments, growing numbers of SMEs are turning to invoice finance to secure reliable cashflow.

While 8 per cent of firms said they currently use invoice finance an additional 19 per cent of business owners plan to use it in future including 11 per cent in the next 12 months.

Amicus Commercial Finance provides a revolving working capital facility based on a proprietary invoice discounting platform which utilises the latest available technology and data extraction methodology.

The firm’s proposition has proved to be very attractive to a broad range of businesses with a turnover between £1 million and £20 million.

Its ‘Intelligent Cashflow’ solution is user friendly, making it straightforward for firms to access working capital. It integrates seamlessly with a business’s accounting system, reconciling sales in real time, updating availability of funds and providing quick and easy access to additional cashflow.

John Wilde, managing director of Amicus Commercial Finance, said: “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 per cent of business owners, meeting debt repayments (30 per cent), buying inventory (29 per cent) and paying staff (24 per cent).