Why Don’t SMEs Take Debt More Seriously?

Clayton M Coke - Founder of PRMS
Clayton M Coke - Founder of PRMS

There is approximately £44.6 billion worth of business debt in the UK at this time and by the time I finish writing (and hopefully you finish reading) that will have risen exponentially.

So, what does that mean for your business? Well, SMEs make up 99.3% of businesses[1] in the UK so that means an SME somewhere in the UK owes another SME, a considerable amount of money.

I have always been fascinated about why things go wrong in life, whether it’s relationships, careers or even lottery winners. There are always lessons to be learnt from the mistakes that are made by others and by the people who made them.

There is a Chinese saying, usually attributed to Confucius [but there is no evidence to prove that fact] which says, “Before embarking on a journey of revenge first dig two graves.” Now I’m not implying that you should go around killing people to get paid for the work you do, because let’s be honest, there are other more ethical ways to run a business. The question I would ask you is this: before embarking on a journey of entrepreneurship what would you bring?

It appears that most entrepreneurs are quite happy to get themselves into debt, take extraordinary risks, even mortgage their house and all their possessions, but so many leave money on the table by not chasing money owed to them or at least getting someone to do it for them.

Businesses do not fail because they have too much money, but throughout 2018 we have seen the “domino effect” of companies, like BHS, Maplin, Mothercare, Toys R Us, Carpetright, Poundworld , Carillion, Debenhams, New Look, Carphone Warehouse, Carluccios, Gaucho, Homebase all become victim to what the media describes as “challenging trading conditions” which in layman’s terms means: it’s bloody rough out there and just wait until after Xmas!

Whilst I have no specific figures for debt in the so-called BAME /SME universe you can guarantee that it is not going to make for good bedtime reading. I did however find two documents which allude to throwing some light on the subject, but they are dated 2003[2] & 2015[3] respectively but are US-based.

The effects of Brexit are slowly becoming apparent and whether you are a leaver or remainer, even then we are still shooting in the dark as to the outcome. So now I’ve scared the living daylights out of you, what can you do to ensure that you don’t end joining that never-ending list?

Firstly, embrace the fact that with big risks comes big rewards. However, stupidity rewards no one and most mistakes for businesses come about by taking unnecessary risks that cannot be explained or even understood.

A recent report stated that UK businesses now owe £3bn in unpaid VAT to HMRC[4] which is a 22% rise. Now, if you are an SME that has raised an invoice, but you haven’t been paid it is your job to pay that money to HMRC, the fact that you haven’t collected it from your debtor is not their concern. A lot of that debt is from unpaid invoices that have never been chased and probably never will until either you go out of business or your debtor does.

2019 is a new year with new challenges and new opportunities, make sure your hard work counts for something.

Written by Clayton M Coke | PRMS LTD

Instagram: @prmsltd


Clayton M Coke is the Founder & Managing Director of PRMS Ltd an Ethical Debt Recovery™ & Business Debt Prevention™ Company formed in 2002 & based at Gracechurch St in the City of London. Clayton trained as a Legal Executive, working in Private Practice, Local Authority & as an In-House Lawyer before deciding to form PRMS. He is an expert in ethically avoiding the problems of bad debt and in business debt prevention.

[1] UK Small Business Statistics

[2] Robert W Fairlie & Alicia M Robb [Yale University] Oct 2003 – “Why Are Black-Owned Businesses Less Successful than White-Owned Businesses? The Role of Families, Inheritances, and Business Human Capital”

[3] HBCU Buzz – 12 Reasons why Black Businesses fail within the first 12 months

[4] Business Matters Magazine

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