More than four in 10 (43%) small and medium-sized enterprises in Ireland have had to write off bad debt in the past 12 months, research from Bibby Financial Services Ireland shows.

Irish SMEs have written off an average of €35,000 in the last year, and two-thirds (65%) of small firms that have suffered with bad debt said they are running at a loss. A further 62% said they don't have the cashflow to grow while 53% are just about breaking even.

Over half of affected businesses (54%) had to write off up to €10,000 while 16% wrote off between €10,000 and €20,000, and 10% have written off between €20,000 and €50,000.

The issue is most prevalent in manufacturing where 53% of businesses have had to write off bad debt, but a significant number of businesses in transport/distribution/haulage (50%), wholesale (44%), services (41%), and construction (36%) have done the same.

Some 56% of respondents said it has become harder to secure business funding in the past six months, and 55% believe banks are less willing to lend to small businesses now compared to six months ago.

A substantial number of businesses (53%) have experienced a reduction in available finance or credit from their banks or other financiers in the last six months.

Reasons for this decrease include businesses being deemed high-risk (38%), poor business performance (30%), inadequate collateral (30%), and the inability to meet financiers' criteria (28%).

Over two thirds (68%) said it’s taking longer for customers to pay invoices in full, compared to a year ago.

While the survey noted that this issue is impacting across all sectors, those that have seen a significant issue are the transport/distribution/haulage sector (75%) and the manufacturing sector (71%).

Furthermore, a quarter of SMEs report that three to five of their customers have either become insolvent or ceased trading, creating a domino effect, whereby unpaid debts and disrupted contracts can leave SMEs with cashflow issues.

On the supply side, 30% of SMEs have seen one to two of their suppliers become insolvent or stop trading in the past year.

For SMEs, managing rising costs has become a critical challenge, with energy costs emerging as the most pressing issue for 30% of businesses, followed by wage expectations/labour costs (19%).

Many businesses are turning to external business finance to fund their business. Among the most popular forms of external finance are: high street banks (49%), invoice financiers or asset-based lenders (15%), challenger banks (11%), and fintech lenders (9%).

Despite the challenges, many businesses remain focused on growth and investment. SMEs are planning to invest in areas such as recruitment (28%), staff training (28%), digital technology (28%), new products and services (27%), and sustainability (25%).

Businesses are continuing to plan for investment though, with the average expected investment figure standing at €275,500.

"The impact of unpaid invoices and insolvencies is devastating—many businesses are forced to write off thousands of euros, leaving them with limited resources to invest or grow," said Mark O'Rourke, managing director of Bibby Financial Services.

"Additionally, the difficulty in accessing external finance and the rising costs of energy and labour are compounding the pressures on SMEs. With over half of businesses finding it harder to secure funding, it’s clear that the financial ecosystem is becoming more challenging.

"However, despite these challenges, there remains a strong sense of resilience and determination within the SME sector. Many businesses are adapting by focusing on strategic investments in key areas such as technology, recruitment, and sustainability, ensuring they are positioning themselves for long-term growth.

"While the road ahead may be tough, SMEs continue to demonstrate their vital role in the economy, with many optimistic about their future and committed to finding new opportunities for innovation and success. With the right support and guidance, Irish SMEs can thrive, contributing to a more robust and resilient economic landscape."

(Pic: Getty Images)