The value of bad debt suffered by small businesses has surged by 127% over the past year, according to Bibby Financial Services' (BFS) latest SME Confidence Tracker. On average, small businesses have written off nearly £40,000 in unpaid invoices, a significant increase from £17,500 in the spring. The proportion of companies affected by non-payment has also risen, now at 40% compared to 30% earlier in the year. This trend creates supply chain pressure, exacerbated by late or non-payment from larger and smaller businesses. BFS CEO Jonathan Andrew highlighted that bad debt is a "hidden assassin" for SMEs, and with corporate insolvencies still high, 50,000 small businesses close annually due to late payments.
Andrew acknowledged that while government initiatives like the Fair Payment Code are helpful, they may not be enough to address the growing issue. He emphasized the need for more working capital in supply chains and shorter payment times to protect SMEs, distinguishing between late payments and bad debt due to non-payment, which can have a devastating impact across supply chains.
- The amount of unpaid debt written off by small businesses has dramatically increased, posing a severe threat to their financial stability.
- Late payments and bad debts are not only harming individual businesses but are also putting entire supply chains at risk, as seen by the rising number of corporate insolvencies.
- While measures like the Fair Payment Code are a step forward, there is a critical need for more working capital injection and a better understanding of the unique challenges caused by bad debt in order to protect SMEs.
The SME Confidence Tracker Q3 2024 report can be downloaded here.
