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Bad debt is a problem for small UK businesses.

Commercial Domestic Investigations understand that as a small company owner,  it is in your best interests to chase late payments to avoid accruing bad debt. Should your company be deprived of revenue, you could find it hard to fund operations, limiting growth potential. A new study has shown Commercial Domestic Investigations that a majority of UK small businesses are writing off bad debt, despite not having compensation measures in place.

Bad debt problem

Research conducted recently by Bibby Financial Services illustrates that bad debt continues to be a big problem for many British small to medium-sized enterprises (SMEs). The company discovered that 27% of those polled have been forced to write off bad debt during the last year.

The study also showed that UK SMEs have had to write off £11,829, on average, of bad debt, because their customers have failed to settle invoices. Explaining the consequences of bad debt, Bibby Financial Services’ Global Chief Executive, David Postings, noted that “a chronic problem [of bad debt] for SMEs [which] can lead to staff cuts, delayed investment plans and – at worst – insolvency.”

Providing key insight

New research cited by Is 4 Profit, an SME resource site, indicates that these consequences are not stopping small firms without compensation protections writing off bad debt. This poll of 500 companies, which was conducted before the UK’s recent decision to leave the EU, showed that 53% of respondents have written off bad debt. This finding comes despite the fact that just 36% of those questioned have invested in the insurance needed to claim compensation in such circumstances.

Meanwhile, the poll indicated that even though 68% of those surveyed have been forced to deal with at least one non-paying customer at some point in their business’ lifespan, under two thirds have not invested in credit insurance. Also, the research discovered that small companies would rather use their profits, as opposed to their savings, to bankroll expansion efforts.

Tackling late payments

Commenting, the Federation of Small Businesses’ (FSB) Development Manager, Natalie Gasson, said “This is as much a policy issue as it is a cultural problem within UK business. Small firms need confidence to charge interest and complain about late payments. The fear among the smallest companies, particularly when dealing with larger firms, is that complaining about a late payment could result in lost future work which will harm cash-flow for their business.”

Safeguard cash flow

With this research, it is clear that as a small firm leader, you must safeguard your cash flow at all times. Invest in preventative measures such as taking out the appropriate insurance and credit reporting, which tracks a client’s payment history, before you strike a deal. By pursuing this strategy, you will ensure that your firm does not have to waste time chasing late payments, or write off bad debt.

About Commercial Domestic Investigations

Commercial Domestic Investigations are regarded within the debt collection and credit control industry as one of the best credit management companies in the UK. Established in 1988 to support and service all sizes of companies in the field of Credit Management.

Commercial Domestic Investigations have recently featured in the press in The Guardian. To keep up to date with the latest debt collection news make sure to follow Commercial Domestic Investigations on twitterLinkedIn and Google+.

We now boast a national client base in excess of 30,000 companies. Commercial Domestic Investigations has grown by listening to clients’ requirements and adapting our services to meet all companies’ needs from Sole Traders, SMES, Ltd and Plus. Please contact us on 08444 159200 for more information.

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