Third of Irish SMEs forced to write off bad debts in past 12 months, survey finds

A third of Irish SMEs (small- and medium-sized enterprises) have been forced to write off bad debts in the past 12 months, according to a survey by financial services group Bibby.

The bad debts were mainly due to customer non-payment or insolvency, the survey found, while the average amount written off was €18,543.

Businesses in the wholesale sector were the most impacted with 43 per cent saying “they’ve had to write off a bad debt”.

This was followed by SMEs in the business and professional services sector (38 per cent) and those in the transport sector (38 per cent).

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Some 43 per cent of respondents said they have noticed a deterioration to the length of time it takes for an invoice to be paid.

Over the last three months, it took on average 28 days for SMEs to be paid, the survey indicated, with those in the construction and transport sectors saying it took the longest to be paid (37 and 32 days respectively).

Chasing unpaid invoices was found to be the top financing problem for SMEs, mentioned by almost a third (32 per cent) of respondents. Construction was the main sector to say that this was the key issue (45 per cent) followed by transport (38 per cent).

Another issue highlighted by the survey was access to finance. SMEs with a turnover between €5 million and €10 million noted that they find it most difficult to access finance (27 per cent), while those with a turnover between €10 million and €25 million found it difficult to manage day-to-day cash flow (53 per cent).

There were also a number of sector variations. The top financing issue for SMEs in the manufacturing space is trying to understand the credit risks associated with their client base (36 per cent), while wholesale SMEs say their top financing concern is being able to fund new or larger contracts until they get paid by the customer (27 per cent).

“These results clearly demonstrate that managing cash flow and accessing working capital is an ongoing consideration for SMEs,” Mark O’Rourke, head of business with Bibby Financial Services Ireland, said.

“Such funding is vital in ensure businesses can deal with the range of issuing facing them such as inflation and supply chain disruptions as well as offering them the opportunity to invest and grow,” he said.

“However, SMEs also have to take steps to ensure they don’t fall foul to non-payment such as completing full background checks on all customers before extending credit, diversifying their customer base and ensuring strict payment protocols are enforced,” he said.

“Furthermore, business owners are often unaware of the broad range of funding options available to them as they wait for debtors to settle outstanding amounts – in many cases, alternative funding solutions are far more suited to their needs than traditional lending options and will provide SMEs with certainty of payment and more sustainable sources of liquidity,” Mr O’Rourke said.