Average SME has written off €25,000 in bad debt in past year
Almost four in ten (38 per cent) Irish small and medium-sized businesses have suffered from bad debt in the past 12 months, according to research from Bibby Financial Services.
While the incidence of bad debt remains high, the average amount written off by SMEs this year has decreased 28 per cent to €25,250.
Almost half of impacted businesses (48 per cent) have written off up to €10,000 while 11 per cent wrote off between €10,000 and €20,000, and 22 per cent wrote off €20,000 to €50,000.
More than half (53 per cent) of businesses in the manufacturing sector reported that they had to write off bad debt, making it the most affected sector ahead of wholesale (44 per cent), transport (40 per cent) and construction (37 per cent).
However, just one in three SMEs in the services sector reported suffering from bad debt.
Of those businesses that have been affected by bad debt, two-thirds (67 per cent) are now operating at a loss, and 42 per cent report they lack the cashflow needed to grow.
A further 62 per cent state they don’t have sufficient cashflow to operate effectively on a day-to-day basis.
Delayed payments are another issue, with 65 per cent saying it now takes longer for customers to pay invoices in full compared to one year ago.
The average value of unpaid invoices currently stands at €72,000. The construction sector is particularly affected with 72 per cent reporting longer payment delays, while the wholesale sector is currently owed the most, at €102,000 on average.
One in six (17 per cent) reported that three to five of their customers have either become insolvent or ceased trading, while nine per cent say this occurred with six to eight customers.
In comparison, 25 per cent experienced the insolvency of three to five customers in 2024, indicating a modest improvement this year.
On the supply side, 34 per cent of SMEs have seen one to two of their suppliers become insolvent or stop trading in the last year, while 19 per cent have seen three to five go out of business.
However, there are signs of improvement in terms of access to finance. 48 per cent believe it has become harder to secure business funding in the past six months, down from 56 per cent this time last year.
In 2025, 49 per cent report that their external bank or financier has continued to offer the same level of credit as in 2024, but 51 per cent believe banks are less willing to lend to small businesses now compared to six months ago, despite 43 per cent of SMEs saying their need for external finance has increased.
When asked what their primary reason for using or considering external finance was, almost four in ten (37 per cent) cited expansion and investment as their priority.
The funding of day-to-day operations (30 per cent) and paying off debt (12 per cent) are also noted, demonstrating the strong current trend of growth among Irish SMEs.
Despite challenges with bad debt, Irish SMEs have big plans to invest in the coming months, with 92% intending to do so and an average investment value of €193,000.
The average amount in bad debt written off by Irish SMEs has fallen 28 per cent from 2024.
Staff training (35 per cent), recruitment (34 per cent) and digital technology and IT, including AI (33 per cent) are among the top priorities for this investment.
Aoife McGinley, head of client services at Bibby Financial Services, said the resilience and intent to grow being displayed by Irish SMEs was "truly remarkable".
(Pic: Getty Images)
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