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North West Manufacturing: Is Bad Debt a Barrier?

by | Sep 15, 2019 | Bad Debt, Debt Claim, Debt Collection, Debt Management, Late Payment, Lawyers, Litigation | 0 comments

First the good news: manufacturing in the North West has been on the up. Figures in a report from EEF and BDO LLP suggest that the region is one of the best-performing for manufacturers.

Manufacturing accounts for 15.5% of the region’s total output, the third highest in the UK. There are now 14,560 manufacturing firms in the North West employing 318,000 people – over 8% of the total workforce.

However, while this growth represents a significant improvement, there have been indications of a tail-off, amid economic uncertainty over the UK’s post-Brexit arrangements.

There is also a common problem many UK manufacturers face, which contributes to the pressure they feel themselves under. This is bad debt.

THE SPREAD OF BAD DEBT

Not getting paid on time – and sometimes not at all – is an endemic issue for SMEs.

For manufacturers, a limit on their cash-flow means a limit on new investment in expanding what they do, and can also lead to increased pressure on supply chains.

A report from Bibby Financial Services puts bad debt at over £20,000 per business in the UK, marking a 70% increase.

You could view it as bad debt increasing at the same time as manufacturing activity, which makes it increasingly difficult for SMEs to avoid it.

If late payments leading to limits on cash-flow becomes normalised, the risk is that manufacturing in the North West and elsewhere in the UK will have a kind of in-built barrier, and business growth will stall.

DEALING WITH DEBT

Debt is not inevitable, and it is recoverable.

Many firms now typically wait over 40 days for payments. Chasing bad debt can be time-consuming and a drain on resources that would otherwise go towards growing the core business.

The vital thing for manufacturers is not to write off bad debt.

Tackling debt requires a strategic approach, as an integral part of business planning. This means looking at implementing robust credit controls and debt recovery processes.

It also means carefully researching prospective customers before committing any work or services to them.

If you require advice about debt, and how to recover it and avoid it, please contact us.

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