Small and medium sized businesses (SME) across Britain wrote off a combined total of £5.8bn of debt in the last financial year, according to research.
Direct Line for Business released research that highlighted the problems SMEs face when claiming money owed.
More than 80 percent of the 728 companies who took part in the analysis still have outstanding balances outstanding from their debtors, with the average business estimated to be owed £63,000.
A surprising fact the research showed is that the 40 percent of SMEs who have written off unpaid debts in the last financial year claim that they don’t even know how much money they are owed by their debtors.
When asked why their business had decided to write off unpaid debts in the last financial year, the biggest reason, cited by 29 percent of respondents, was that the supplier had become insolvent and was therefore unable to pay the debt.
Other reasons why companies wrote off debts were that businesses didn’t want to ruin customer relationships, they didn’t have the time to chase up debts and they simply didn’t know how to go about claiming the money owed.
Nick Breton, head of Direct Line for Business, said: “With more than a million SMEs based across the UK, these enterprises really do make up the backbone of the British economy.
“All of these debts add up and with nearly 7,000 companies estimated to have entered liquidation in the first half of 2016 alone, the potentially disastrous knock-on effects of writing off money owed are clear.”