UK SMEs businesses wrote off £5.8 billion in unpaid bad debts according to a data report by Direct Line. In addition to these figures Ormsby Street’s has commented on research indicating that 60% of small businesses will fail within the first five years of trading.
“One in five small businesses said that they wrote-off debts and the analysis of those that did indicated that this was on average £31,330. Ten per cent of those that wrote-off debts said that they had given-up on chasing outstanding balances of £100,000 or more. The most common reason for such write-offs was because a customer became insolvent – as was the case in 29 per cent of occasions – and on 17 per cent of occasions businesses did not “think” that the customer would have sufficient funds to pay.
One in 10 said that they were writing-off the debt because they felt chasing it would damage future business with the customer. Small businesses generally survive the first year according to Ormsby Street’s analysis with 91% in business after 12 months.
Martin Campell Chief Executive of Ormsby Street said “A small business can fail for many reasons of course, but poor cash-flow remains one of the main causes of problems. Poor cash-flow is mostly caused by late payment of invoices and this is certainly something that can be addressed by any small business.”