One in three SMEs admit they have had to write off more bad debts this year
Chasing unpaid invoices is the top financing problem for SMEs
One-in-three SMEs in Ireland has had to write off bad debts in the past 12 months, with an average of €18,543 being written off by firms.
Bibby Financial Services Ireland, which provides funding solutions to SMEs, did the survey of 200 companies and found that the bad debts were mainly due to customer non-payment or insolvency. The wholesale sector was the most affected, with 43pc of firms having had to write off a bad debt. It was followed by the business and professional services sector (38pc) and transport (38pc).
More than two in five respondents said that they had noticed a deterioration in the length of time it takes for an invoice to be paid. Over the last three months, on average it took 28 days for SMEs to be paid – with those in the construction (37 days) and transport sectors (32 days) taking the longest to be paid.
The survey indicated that chasing unpaid invoices is the top financing problem for SMEs, mentioned by almost a third (32pc). Construction was the main sector to state that this was their key issue (45pc), followed by transport (38pc).
Many businesses are turning to external finance to fund their business
The other key matters of concern for SMEs are managing the risk of customer non-payment/bad debt, as well as effective management of day-to-day cashflow – with both items being mentioned by just over a quarter of those surveyed.
SMEs with a turnover between €5m and €10m said that they find it most difficult to access finance (27pc), while those with a turnover between €10m and €25m find it difficult to manage day-to-day cash flow (53pc).
While nearly two-thirds (61pc) stated that their company’s cashflow is stable and meets their needs, 27pc felt that they do not have the required cashflow to grow. As a result, many businesses are turning to external finance to fund their business.
Among the most popular forms of financing are business loans, credit cards, private equity, overdrafts, and invoice finance.
In relation to the exit of Ulster Bank and KBC from Ireland, of those who have had to open a new business account, 55pc said they found it difficult to find a ‘human’ to talk to with, to discuss their issues. Another 36pc said that incurring significant fees and cashflow problems caused by having to reapply for overdrafts were an issue.
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.”