You’d think that getting paid for work or sales would be at the top of the priority list for any company. It seems, though, that many SMEs are only too willing to write off any debt that presents difficulties.
SMEs and Bad Debt
Although they don’t get media coverage like the giants, SMEs are the lifeblood of UK business. Government research last year showed that more than 99% of the country’s businesses are SMEs, 1.3 million of which employ at least one person, while 4.1 million consist solely of the owner or owners.
Many of these businesses survive on narrow profit margins, and failure to get paid could have extremely serious consequences. Which makes it even more staggering that, between them, SMEs wrote off nearly £6bn of bad debts in the last financial year.
In a survey of 728 SMEs, more than 80% reported being owed outstanding debts, the main reasons for not pursuing these being debtors becoming insolvent, reluctance to harm customer relations, and not knowing how or having the time to chase debts. While the first is a genuine problem, there’s no reason for the other excuses.
If you own and run an SME, you’re a professional, and your relationships with your customers or clients should be on a professional basis. This includes payment of invoices. I doubt if many of the business owners who give customer relations as a reason would be offended if someone reminded them they hadn’t paid an outstanding invoice.
That doesn’t mean reminders to pay should be aggressive, of course. A firm but polite reminder of an outstanding invoice and your terms is unlikely to offend many customers, and if it does — well, is it really worth keeping good relations with a customer who won’t pay you?
Running an SME, especially a very small one, isn’t easy. You’re often chief cook and bottle washer, and you have to learn a wide range of skills — including credit control.
In the end, though, not having time to pursue your debts is a false economy, since a business that isn’t paid is unlikely to survive. If you genuinely can’t cope with credit control (like the 40% in the survey who weren’t sure how much they were owed) perhaps it’s time to outsource it, or maybe take on a part-time employee to cover it.
If you don’t know where to start in recovering bad debt, get in touch with SJ Collections to discuss the issues. But don’t become part of the statistics.