Construction sector wide open to bad debt Small and medium sized businesses in the construction sector are failing to protect themselves from bad debt, with nearly a third (31%) reporting they have no provisions in place should an unexpected debt arise, according to new research* from Bibby Financial Services. Of those that have planned for bad debt, 41% rely purely on the threat of legal action, a third would use their bank overdraft facility (34%), while 21% plan to cover the shortfall from their personal savings, resulting in any unexpected problems hitting cash flow hard and putting immediate pressure on the business. In addition, the time spent chasing late payment and the effect of dealing with bad debt is costing UK small and medium sized businesses, including those in the construction sector, an estimated 286 million man hours and nearly GBP3.6 billion per year.

David Robertson, chief executive of Bibby Financial Services, said: 'It seems that far too many owners and managers in the construction sector are burying their heads in the sand, hoping that dealing with late payers and bad debtors will not happen to them.

Unfortunately, however good the relationship with suppliers and contractors, the reality is that chasing payment and dealing with bad debt is a fact of business life which can strike any business at any time, however unexpected.

'I would urge the construction industry to consider the impact of being on the receiving end of a late payment or a bad debt and how the systems, or lack of systems, they have in place would allow them to cope with it.