Almost half of small and medium enterprises have turned down a contract or order due to not being able to deliver the work, new research has revealed. The study, from Hitachi Capital Invoice Finance, shows how ‘unfair reasons’ are the predominant cause for SME’S having to say no to paid work.
This includes how the contract would not pay enough, or it was priced too cheaply (25%), a lack of management time and the customer known to be a bad payer (24%) or that they were offered unfair payment terms (23%).
Of 501 business owners surveyed, half (50%) have lost out on up to £10,000 in the past year due to rejecting contracts, with initial ‘start-up’ businesses at the most risk, with 28% having lost between £20,001 and £30,000 by doing so.
Manufacturing businesses appear to struggle the most, with 42% of their business owners stating they have turned down orders on several occasions, due mainly to the unreasonable demands made by customers.
Outlook remains positive however, with a majority of companies (60%) agreeing they don’t think that Brexit will impact on them rejecting more, or acquiring less work in the years ahead. An even higher percentage (66%) have not had to invest personal funds into their business in the past 12 months.
Andy Dodd, managing director at Hitachi Capital Invoice Finance, said: “SMEs are unfortunately having to decline contracts and orders due to unfair payment terms and unreasonable asks, not because they can’t deliver the work. Bad payers and unrealistic contractual terms can have a huge impact on any business, especially those that are relatively small or in start-up.
“This is often part of a wider problem, not all business owners have the time and resource to chase up invoices or can risk working with an unreliable supplier. Our research from November last year found that 27% of SMEs are in ‘survival mode’ with investment plans on hold, highlighting how SME’s simply cannot afford to be turning down work, which more than half are currently doing.”
The research also shows that retail and wholesale businesses appear to be the ‘healthiest’, as they are less likely to turn away work.
Businesses in Yorkshire are least likely to turn down contracts and orders, though it is the region that loses out on more money than the average by doing so. For example, nearly 40% of them lost out between £30,001 and £100,000.
Companies in Northern Ireland turn down the most work, with only 21% who can claim not to have turned down a contract.
For the full SME Contract Rejection white paper report, visit http://www.hitachicapital.co.uk/contract-rejection