A third of SMEs in Ireland have written off bad debts over the past 12 months, with the average amount lost adding up to €18,543, research from Bibby Financial Services has revealed. According to the financial provider, the bad debts were mainly a result of customer non-payment or insolvency.
The wholesale sector was the most affected, with 43% of businesses saying they had to write off bad debt, followed by the business and professional services sector at 38% and transport, also at 38%.
43% of respondents noticed a deterioration in the length of time it takes for an invoice to be paid. Over the last three months, it took 28 days on average for SMEs to receive payment, with those in the construction and transport sectors saying it took the longest to be paid (37 and 32 days respectively).
The statistics also reveal that chasing unpaid invoices is the top financing problem for SMEs, as mentioned by almost a third of respondents. Construction was the main sector to state that this was their key issue (45%) followed by transport (38%).
Other key concerns for SMEs include managing the risk of customer non-payment, as well as effective management of day-to-day cashflow, both of which were noted by over a quarter of respondents.
SMEs with a turnover between €5m and €10m found it most difficult to access finance (27%), while those with a €10m to €25m turnover found it difficult to manage day-to-day cash flow (53%).
While nearly two-thirds state that their business’ cashflow is stable and meeting their needs, 27% feel that they do not have the required cashflow to grow. As a result, many SMEs are turning to external finance to fund their business. Among the most popular forms of financing are business loans (38%), credit cards (30%), private equity (27%), overdrafts (26%) and invoice finance (16%).
Mark O’Rourke, Head of Business with Bibby Financial Services Ireland, said: “These results clearly demonstrate that managing cashflow and accessing working capital is an ongoing consideration for SMEs. Such funding is vital in ensuring businesses can deal with the range of issuing facing them such as inflation and supply chain disruptions as well as offering them the opportunity to invest and grow.”
“SMEs also have to take steps to ensure they don’t fall foul to non-payment such as completing full background checks before extending credit, diversifying their customer base and ensuring strict payment protocols are enforced."
"Furthermore, business owners are often unaware of the broad range of funding options available to them as they wait for debtors to settle outstanding amounts – alternative funding solutions are far more suited to their needs than traditional lending options and will provide SMEs with a certainty of payment and more sustainable sources of liquidity.”