SME’s cash strapped thanks to unpaid invoices

Many small and medium-sized enterprises in the UK are suffering from cash flow crises because of their failure to collect on invoices that are still outstanding.

The number of companies going bankrupt in the UK is increasing and debts held by these companies are going up.

This is despite the fact that financing is hard to come by and this is not helped by the fact that many people are being slow to pay their bills. A recent survey has highlighted that unpaid bills are causing an enormous problem for many small companies in Britain.

300 lawyers specialising in debt recovery for small and medium-sized companies have recently been surveyed. Nearly 95 percent of them said that the number of owners seeking legal advice about invoices that have not been paid is significantly increasing. Around 30 percent of them have said that this part of their businesses increased by around 50 percent.

This news is not so surprising, considering the state of the economy. Many small businesses are finding that they don’t have a great deal of cash and that it is difficult to borrow money from banks. In addition to this, the small businesses are reluctant to take money from banks and often want to tap into other sources of finance. All of this leads to a significant problem when it comes to the company’s cash flow account.

The survey highlighted that the average amount people are seeking to recover is somewhere between £5000 and £10,000. Around 20 percent of the debts are worth over £10,000. Size is not the only important factor here and the number of debts that are outstanding is also increasing. This is resulting in more legal action is being taken against people failing to pay.

Unfortunately, even after a court judgement is made against someone, the recovery process can still take a long time. This can increase the risk of a company become insolvent by further aggravating the cash flow problem that the company is having.

The survey highlighted that in some cases it can take over six months for money that has been ordered to be paid by a court to actually be settled. The average time between judgment and the company receiving the money is about four months.

Contact Law commissioned the survey and the director of it was Dan Watkins, and he said, “It’s hardly surprising to see that debt recovery lawyers are getting more business. The country is going through a significant recession and it is becoming increasingly challenging for smaller companies to stay in business.

Late payments are not helping the situation and many companies are looking to recover the debts as quickly as possible.” The findings by the survey have been reinforced by a similar survey from the FSB which has further highlighted the cash flow problems that some businesses are facing.