Half of firms forced to let staff go due to €360bn unpaid bills
HALF of Irish businesses have had to let people go because of late or unpaid bills, new research has found.
Bad debts – bills or invoices that companies have written off due to late or non-payment – grew from 3pc of annual revenues in 2013, or €350bn, to 3.1pc this year, or €360bn, a study of 10,000 European businesses by credit management group Intrum Justitia found.
In Ireland, the level of bad debt loss was even higher, increasing 0.2pc to 3.7pc of all businesses' total annual revenue – a combined loss of €6.2bn.
Nearly three-quarters of the companies taking part said that there had been no improvement in the late payments problem in the past three months despite the economic pick-up, and 46pc believed late and non-payment risks were actually increasing.
Hardest hit are small and medium enterprises, according to Intrum Justitia's UK and Ireland sales director Gerry Barrett.
"Imagine if European companies had those €360bn they now need to write off on a yearly basis, to invest in their businesses" he said, urging companies to ensure tighter control over credit risk management and debt collection.
Business should write clear contract with customers stating the terms of business, Intrum Justitia said, make sure they know who they are doing business with, monitor key customers' solvency, regularly check customer addresses and implement swift reminder and charge default interest when bills go unpaid. "Act immediately to get paid, don't delay," said a spokesperson.
Three-quarters of those surveyed also said they had not felt any positive impact of an economic recovery in the past three months. This was particularly pronounced in Iceland and Sweden, were only 1 and 2pc of business managers respectively said they had felt any positive impact of a recovery. In Ireland, the figure was 24pc.
Meanwhile, the Small Firms Association (SFA) has said the supply of finance is the main issue for Ireland's small businesses, second only to finding more customers.
The SFA said the cost of financing and working capital is rising, while Irish interest rates remain higher than competitor economies such as Germany.
Chair AJ Noonan said trust has also been broken and that commercial banks need to start building relationships again.
"For Irish SMEs, supply of finance is second only to finding more customers as the most pressing issue we are facing," said Mr Noonan, who is appearing before the Oireachtas Committee on Jobs, Enterprise and Innovation later today.
"Irish SMEs rely heavily on banks as a source of external finance – 93.2pc of the €27.6bn SME finance market – which makes them vulnerable to developments in the banking sector.
"Therefore it is essential that the Government works to deliver a greater diversity of funding such as direct government funding, peer-to-peer lending platforms, business angels and venture capital."
A recent SFA survey found more than half small firms use commercial banks for their working capital requirements, while 40pc rely on them for their investment capital needs.