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Creditsafe’s 2016 A Year in Review, a complete guide looking at company start-ups, closures, directors, CCJ's and much more. Download the full review for free here.
The amount of bad debts issued in 2016 had risen since the previous year after seeing a decline in previous years, although the value of bad debts had decreased. This could indicate that smaller invoices from smaller companies are going unpaid. This puts a big strain on the SME market in the UK. If a small business acquires a bad debt it could be difficult for them to recover it. Sometimes small companies don’t have the financial resources or access to advice to pursue legal action.
When companies are issued bad debts, it can be due to a variety of reasons. However it is most commonly due to customer insolvency or protracted default. A bad debt occurs when a company has extended services, products or finance to another company who hasn’t paid to receive them. Creditsafe captures bad debt information based on the information within a ‘Statement of Affairs’ when a company enters liquidation. A Statement of Affairs is a document detailing a company’s assets and liabilities. We then work this information into a company credit score, giving our customers the most up-to-date and accurate information possible.
Greater London had the highest worth of bad debt in 2016 with a total of over £353,000,000 being written off as bad debt. This is no surprise as companies in Greater London also had the highest amount of bad debts issued. Plus given the volume of companies within the region, an average bad debt of £42,194 is not unusual.
Northern Ireland had the highest average with £110,876. However our findings suggest that this over inflation is due to one company becoming insolvent with a large amount of debt, as the Northern Ireland region had one of the lowest amount of bad debts issued in the UK of 114. Scotland was the second lowest with 761 bad debts issued.