With five million micro-businesses in the UK this equates to a total of over £9 billion written off in unpaid invoices last year.
The study from cloud accounting software provider FreeAgent highlights the difficulties the self-employed and micro-businesses in the UK have in getting paid.
Based on invoices dated between April 1st 2014 and March 31st 2015, FreeAgent found that freelancers and micro-business owners were on average forced to write off £1,804 from unpaid invoices per year.
With a total of five million micro-businesses (businesses with 0-9 employees) in Britain and £1,804 being written off per business, this results in a total of £9,020,000,000 (£9 billion) in invoices being written off per year.
Based on these unpaid invoices, FreeAgent estimates that an additional £800 million sales tax could be lost to the Treasury each year.
Ahead of May Day (01/05/16), the traditional celebration of workers’ rights for pay and conditions, Ed Molyneux, CEO and co-founder of FreeAgent says, ‘With the UK home to an estimated 5 million micro-businesses, including 1.8 million freelancers, there is no longer a ‘typical’ type of worker.
‘Instead, many have chosen to start their own businesses despite not having the traditional protections in place which May Day traditionally seeks to represent.’
One of the biggest issues that these smaller businesses face is getting paid for the hard work that they do, regularly have to deal with clients paying late, or not at all, Molyneux adds.
‘We’ve found the problem is so widespread that these businesses are writing off almost £2,000 in unpaid invoices in their accounts each year.
‘While it’s possible that some business owners may be incorrectly writing off some of their invoices, there are likely to be many more who are still holding out hope for payment and have not yet written them off as bad debt. Therefore the actual amount of ‘lost’ money per year may be much greater.’
Further reading on bad debt
