Small businesses across the UK are owed as much as £5 billion in unpaid debt, according to a new survey.
The figures, compiled by CreditPal, suggest that 43 per cent of small and medium sized enterprises (SMEs) have suffered at the hands of bad debt over the past two years, with the average firm losing out to the tune of £7,500 as a result of clients or partners folding.
London-based firms were the hardest hit by insolvency losses, either as a result of higher failure rates or larger debts. There is expected to be a significant rise in both corporate and personal insolvencies during this year and next, as company failures traditionally peak around 18 months after the end of a recession.
Bad debts can be enough to cripple an otherwise financially viable company. But very few firms take steps like credit checking their customers before doing business with them. Similarly, a very small number have a clear process in place for chasing late payment.
Products like factoring and invoice finance are likely to be increasingly useful for firms that wish to keep a firm grip on their credit control, and avoid the peril of defaulted payments.
