Complaints Creditsafe hears about bad debt
Creditsafe is often contacted by firms complaining that they have been victims of sharp business practice, with firms deliberately withholding payments, or that they have been left out of pocket as a result of companies that owe them money entering insolvency. Indeed, securing the business intelligence to help identify the companies at greatest risk is one of the primary reasons customers sign up to our service.
The impact of bad debt can be hugely damaging to UK businesses. Disrupted cashflow as a result of delayed and defaulted payments is cited as one of the major causes of business bankruptcy.
The UK Government has recognised this problem and even provides bad debt relief to help UK businesses avoid bankruptcy.
Our own research demonstrates that two out of three British companies are likely to be owed monies that have not been paid within the period set out by their terms and conditions. And the average time it takes an invoice to be paid is 27 days in the UK.
The impact of bad debt can have a significant impact on the short term operations of a business and its long term viability. Creditsafe’s research reveals the top 10 complaints of the impact on a business of delayed and defaulted payments:
1. We have seen profitability suffer
2. We have been unable to pay bills on time
3. We have been unable to spend money on marketing services
4. We have been unable to purchase new raw materials
5. We have been unable to expand our business
6. We have been unable to meet tax obligations
7. We have been unable to pay employees on time
8. We have been unable to met contractual obligations (to customers and suppliers)
9. We have been forced to cease trading for a period of time
10. We have been forced to lay off some of our employees
However, there are simple strategies companies can implement to reduce the risk of becoming a victim of delayed or defaulted payments.
Increase debt collection activity (such as threatening legitimate legal action and proceedings for recovery)
Employ a credit referencing agency or conduct online searches to research potential customers prior to signing a contract
• Move to pre-payment for some customers
• Increase (or introduce) incentives for early payment
• Decrease payment terms within the standard terms and conditions
• Take out or extend the level of trade credit insurance
• Employ a debt collection agency to recover debt