SMEs wrote off a combined total of £5.8bn of debt in the last financial year, according to research by Direct Line for Business.
Over 80 per cent of the 728 companies questioned had outstanding debt owed to them by debtors, with the average amount being £63,000.
A further 40 per cent of SMEs who had written off unpaid debts in the last financial year claimed that they didn't even know how much money they were owed by their debtors.
The main reasons for debts being written off were:
- the supplier becoming insolvent
- thinking that the supplier would not have sufficient funds to pay the debt
- not wanting to ruin customer relationships
- being unclear about the proper channels for pursuing payment of money owed
Nearly two thirds of SME owners and decision makers said that they were unsure what an N1 claim form was for.
Nick Breton, head of Direct Line for Business, said:“SMEs should ensure that they are fully aware of all legal avenues designed to help them recoup all of their owed monies. In addition, they should ensure they have the correct insurance in place to account for any loss in earnings that may come about if and when a client or supplier is unable to fulfil their financial obligations.”
Further information: Business Matters
See also: How to make a court claim for money