Bad debt and late payment are hammering Scottish SMEs' cashflow and profitability, according to new data from SME funder Bibby Financial Services (BFS).BFS’s latest SME Confidence Tracker revealed that 39 percent of Scottish SMEs, equating to around 139,000 businesses, experienced bad debt in the past 12 months. For those affected, the average amount written off due to customer insolvency or payment default was £27,500 in the past year.The findings come as the UK Government moves to take a stronger stance on late payment, which is sorely needed – especially with inflation expected to rise further, applying additional pressure on profit margins. Scottish SMEs are currently owed an average of £60,000 in unpaid invoices, with 69 percent reporting that customers are taking longer to pay than a year ago. The knock-on effect is significant – nearly one in five SMEs (19%) have been forced to delay payments to their own suppliers to protect their cashflow, spreading the strain across the supply chain.James Tristan Hart, Business Manager at Bibby Financial Services Scotland said “Scottish SMEs are on a knife edge. Rising costs are hammering cashflow while businesses wait longer and longer for payments to arrive. And as they watch suppliers and customers go under, some firms are writing off tens of thousands in unpaid invoices.”The problem is compounded by rising insolvencies in SMEs’ supply chains. Two-thirds (69%) of SMEs have seen at least one customer go into insolvency in the past six months – an increase from 61 percent a year ago. The same proportion have seen at least one supplier go insolvent in the same period, rising sharply from 54 percent in Spring 2025.The pressure is reflected in falling confidence. The share of Scottish SMEs expecting sales to increase in the next six months has dropped from 73 percent to 62 percent year on year, while the proportion describing themselves as profitable has fallen from 66 percent to 62 percent over the same period.James Tristan Hart added: “Rising costs, global economic uncertainty and geopolitical disruption aren't just slowing Scottish SMEs down – they pose a direct threat to their survival. Costs were already sky high before the Iran war broke out; and many are now seeing their own costs climb even further due to supply chain pressure and falling customer spending power. For businesses across the country, having robust cashflow and closely monitoring payment practices within their supply chains is more important than ever.”NoYesConsultancy23 Apr, 2026