One in three SMEs are reluctant to chase bad debt
London - July 03th, 2014 - Despite UK SMEs being owed billions1 in late payments, new research from automated credit control service, Satago, reveals that one in three SMEs (32%) are reluctant to chase bad debt.
Four in five (81%) affected businesses are reluctant to chase debtors because they find the process uncomfortable while one in five (19%) are afraid of antagonising customers.
This is a dangerous prospect as more than a third (34%) of UK SMEs write off thousands of pounds of bad debt every year. Even with government and industry action, the findings show that there has been limited impact as a quarter of SMEs (24%) surveyed believe the issue of late payments has in fact deteriorated over the last two years. Only 17% believe there has been an improvement.
Despite a widespread unwillingness to pursue late payers, most small businesses recognise that taking action would deliver results: 30% believe they could recover more debt if they were more proactive and one in eight (13%) of those who have had bad debt believe they could recover more than 50% if they chased harder.
According to Satago’s findings, many businesses are held back due to a lack of process. Three quarters of firms (77%) do not have a person or a procedure in place for chasing bad debt and a vast majority have no established escalation process for late payments.
Satago has launched a payments service that introduces the process which many SMEs currently lack in their pursuit of debt. It offers an automated credit control service that tracks late payments and sends automated email and letter reminders to offending customers, allowing users to either use it as "set and forget" automated accounts receivable, or to make their own credit control process more efficient.
SMEs use a variety of tactics for chasing debtors including telephone calls, emails and legal action. Some have even shown up at the debtor’s office/house to escort them to the bank! Interestingly only 15% utilise late payment regulations to charge customers for late payment.
Steven Renwick, founder and CEO of Satago said:
Despite losing out on thousands of pounds every year our research shows that SMEs are struggling to deal with late payments. SMEs feel uncomfortable chasing, do not want to annoy customers and a majority do not have a process in place to deal with the situation.
The current supplier power structure means that big business is in a position to take advantage of SME and freelance suppliers. SMEs must recognise that proactivity can help them deal with late payers: Get a process in place, use the law and work with a third party to remove the distress of chasing.
Notes to Editors:
The report from the all party inquiry into late payments in small and medium-sized enterprises, July 2013 http://www.debbieabrahams.org.uk/wp-content/uploads/2013/07/FINAL-REPORT-ALL-PARTY-INQUIRY-REPORT-INTO-LATE-PAYMENTS-IN-SMEs1.pdf
397 SMEs were surveyed by Consumer Intelligence on behalf of Satago 20th - 23rd May 2014.
Georgia Hanias | Patrick Evans | Amrit Nijjer
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