Tax & admin · 1 August 2016

Small construction firms most impacted by “bad debt”

Smaller construction firms wrote off as much as £15,000 on average last year

“Bad debt” currently affects more than a quarter of the UK’s small businesses, according to latest statistics.

Small firms in the transport and construction sectors are particularly affected, with 30 per cent and 29 per cent of owners respectively reporting bad debt over the last year. Small construction companies were forced to write off as much as £15,000 on average.

Non-payment of invoices by customers – known as “bad debt” – has resulted in 27 per cent of small companies across all sectors writing money off in the last 12 months, the results of the latest SME confidence tracker from small business financier Bibby have revealed.

The quarterly tracker found that the average amount written off by businesses of all sizes because of customers failing to pay up for goods and services in the last 12 months was £11, 829.

Global chief executive at Bibby Financial Services David Postings said: “Bad debt is a chronic problem for smaller firms that can lead to staff cuts, delayed investment plans and – at worst – insolvency.

“Small business owners across the country must take steps to prevent late payment and non-payment from affecting them, particularly at a time of uncertainty when suppliers may look to squeeze payment terms for their benefit.”

Postings added that economic uncertainty following the Brexit vote, which may be felt especially acutely among small firms, gave owners all the more reason to attempt to clamp down on late paying clients.

Despite a perceived lack of confidence, average invoice payment times of UK small business customers actually fell to 38 between April and July 2016, down from 40 days in the previous quarter.

Postings urged the newly-appointed business, energy and industrial strategies secretary Greg Clark to make late payments a focal issue of the new-look government’s small business agenda.

“Now is an ideal time for [Clark] to set out support plans on critical issues such as late and disputed payments,” Postings said.

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Fred Heritage was previously deputy editor at Business Advice. He has a BA in politics and international relations from the University of Kent and an MA in international conflict from Kings College London.

Business development