According to research, small businesses are writing-off tens of thousands of pounds every year in bad debt due to customers not paying their bills.

A report from the new Credit Management Research Centre (CMRC) has learned that more than one in five of all UK firms now says bad debt is a major problem for them, with a third of all companies admitting that late payment is also a serious issue.

This latest report reinforces the findings of The Forum of Private Business which has long been outspoken on the subject of unpaid invoices. Their members had stated that they are spending an average of three hours every week chasing payments. The current value of unpaid, overdue invoices is estimated to be costing SMEs a staggering £17bn at any one time. SMEs write-off on average £14,000 in bad debt, which for those operating at a 5% profit margin translates into a whopping additional sales figure of £280,000 to make up for the loss.

Andrew Arnold, who heads up the debt collection service operated by Pellys LLP, believes that much can be done to aid cashflow and reduce stress if more SMEs had a better grasp of the role that a solicitor can play.

"For instance, we offer a low cost solution with a 'Letter before action' that can be sent to debtors. In many cases the letter gives sufficient warning that you are serious about securing payment and often leads to immediate settlement. Considering that a one-off cost of £10 on each debt may be all that is needed to get payment on over half of your overdue invoices, it's a pretty competitive alternative to pursuing debtors yourself."

The number of insolvencies in the UK is steadily rising, and it is a sobering thought that of the businesses that fail each year, 10,000 do so as a direct result of late payments. ENDS