10 October, 2016
Again this summer we learnt that one in five small and medium-sized firms are expecting to write almost £6bn in bad debts in 2016. This amounts to around £31,000 per company affected, which is no small sum.
And some SMEs are writing off considerably larger amounts. Ten percent of firms reported that they had given up trying to recover bad debts of £100,000 or more.
The reasons for writing off the bad debts ranged from companies owing money having become insolvent, to not wanting to damage relations with a particular client or customer. Other debts were written off based on realism, acknowledging that the client or customer simply didn’t have the means to pay their debts.
Debts of £100,000 are by no means chicken feed. Indeed, to small firms, bad debts of even a few thousand pounds could potentially make the difference between profit and loss, or at the very least stressing that month’s cash flow.
The problem with all companies, including your suppliers and customers, is that once they fall over, they are gone quickly, most never to recover to trade healthily again, including those in Administration.
Which is why monitoring and constant vigilance is so necessary and important.