Small to medium-sized enterprises are increasingly feeling the pinch of unpaid debts, with the average UK business writing off £40,000 a year.
Research conducted by Bibby Financial Services discovered that the value of bad debt soared by 127 per cent for SMEs in the first half of the current financial year.
More than 40 per cent of UK SMEs reported suffering from non-payment over the past year.
The ripple effect of this financial strain extends to suppliers, with 58 per cent of businesses witnessing at least one supplier going bust, and 56 per cent facing the insolvency of at least one customer.
The government estimates that late payments and bad debts contribute to the annual closure of 50,000 SMEs.
New legislation now mandates all large businesses to include payment reporting in their annual reports, placing the responsibility on these firms to clarify their payment treatment towards smaller companies.
January often brings a wave of unpaid debts as businesses scramble to settle various bills, including taxes.
Newport-based Bellavia & Associates, a law firm specialising in debt recovery, has urged businesses to tighten their credit control and debt recovery processes at the start of the year.
Managing director Zep Bellavia stated: “Cash is king for businesses, particularly smaller ones, and the start of a new year is a good time to be tighter and better with credit control and recovering debts.”
Bellavia advised businesses to consider the cost of bad debt versus the expense of enlisting a lawyer for debt recovery.
He said: “Nothing is more expensive than bad debt, and we know all there is to know about recovering cash.”
Bellavia & Associates offers specialist services, such as freezing third-party bank accounts, which can expedite payment or provide current information that aids the debt recovery process.
The firm also provides health checks on businesses’ credit control and debt recovery processes.
Bellavia concluded: “I’d advise businesses wanting to improve their cashflow to pick up the phone and see how we can help.”