UK SMEs Forced To Write Off $62B In Unpaid Invoices

Millions of dollars worth of unpaid invoices are written off by U.K. SMEs as losses every day, according to the latest analysis from Amicus Commercial Finance.

Researchers released the statistic this week to highlight the growing issue of late B2B payments in the U.K. According to the report, the equivalent of $167 million in debt is written off as a loss every day by SMEs, amounting to more than $62 billion every year.

The average amount written off by each small business is about $14,600 a year, which rises to more than $42,000 for each medium-sized business with between 50 and 249 employees, Amicus found.

That’s a lot of money that SMEs in the U.K. have declared as losses, likely to never be paid. And it creates significant cash management issues for these businesses, the research found: A fifth of SMEs surveyed said cash flow issues have led them to lose contracts.

Invoice finance is becoming a popular way for companies to remedy the issue. While just 8 percent of companies surveyed said they have turned to this tactic to improve cash flow, an additional 19 percent said they plan to use invoice financing in the future — 11 percent of which said they will turn to invoice finance within the next year.

“Our research shows that not only is there a reliance by many U.K. SMEs on clients’ invoices being paid within the debtor pay period but that, despite this, significant amounts of debt are being written off due to nonpayment,” summarized Amicus Commercial Finance Managing Director John Wilde in a statement. “Given this, it’s understandable that business owners are increasingly turning to invoice finance as a way of converting unpaid debts into instant working capital.”

The company, which itself offers invoice financing, said it also found that 41 percent of SMEs cite paying suppliers as the largest challenge that results from cash flow problems. Nearly a third cited meeting debt repayments as their biggest hurdle, while 29 percent said inventory purchases. Nearly a quarter said paying staff was their biggest challenge.

Amicus released the research just weeks after it applied for a banking license in the U.K.