Small firms left chasing funds

Nearly three quarters of small and medium sized businesses spend up to three days every month chasing money they are owed, new research shows.

Figures from Liberis reveal that businesses are spending an average of £5,000 annually in an attempt to recover what they are owed.

Although one in four SMEs revealed they were owed more than £20,000 of ‘aged debt’, the average figure per business amounted to £11,000.

This equates to neatly £15 billion that companies are owed finance across the UK, as there are currently 5.7 million SMEs in operation.

Small firms are unable to invest in their own growth as a result, while those operating on extremely tight budgets can be forced out of business altogether.

Aged debt is a particular problem as more than one third of businesses say it has disrupted their cash flow.

This has resulted in business plans being put on hold, while firms can also struggle to afford to replace outdated equipment with more modern alternatives.

Two in five firms said they lack a debt recovery process, while 30% said they would need to consider alternative finance options in order to cover funds and keep trading.

However, refinancing is often to the detrimental to other business activities given the amount of time and effort that can be required, meaning SMEs are placed under further pressure.

While it can provide a short‐term solution, businesses that are struggling with their finances should seek advice at the earliest opportunity.

An independent business review can help to showcase where operations could be improved or streamlined, which may avert the need for insolvency and recovery practices in the long‐term.

A firm may also want to alter its payment terms and have stricter credit controls in a bid to reduce unpaid invoices in future.

Unpaid debt was found to be highest in the retail sector, as 21% of firms reporting an issue were from the industry, whereas 8% of tech and IT firms reported similar issues.

By Phil Smith


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