A N D I FA D L A N
H A L IL IN TA R
HOW SMES CAN
OVERCOME
PAYMENT HURDLES &
ENHANCE
SUSTAINABILITY
THE DEBT CHALLENGE
CONTENT
INTRODUCTION
METHODOLOGY
ISSUES OF DEBT COLLECTION
RECOMMENDATIONS
CONCLUSION
INTRO
Small and Medium-sized Enterprises (SMEs) play
a critical role in the world’s economy, repre senting
90% of businesses and more tha n 50% of
employment
responsible for 40% of na tional inc ome (GDP) in
emerging economies. But, the ir growth is fa ced
with a myriad of challenges
ma inly financial constraints cause d by debt
colle ction suc h as late payments, limite d
resource s, and external factors which impact their
cash flows.
METHODOLOGY
COLLECTIO N A NA LY SIS
a systematic review of interpretative analysis of
existing literature on the the data, where the focus
subject of debt collection was not just on what the
challenges faced by SMEs data says, but also on what
along with the solutions it means within the wider
context of SMEs and their
financial management
challenges.
ISSUES OF DEBT
Legal, Financial &
Limited Resources COLLECTION
Late Payments
Regulatory
Challenges
• Lack of finance and • 25% of global companies receive late • Weak insolvency
manpower. payments - 88 days regime
• Asa result, difficulties • This led to SMEs borrowing funds to cover • Personal assets for
in a dedicated staff or late payments business credit
better systems. • 10% higher risk of financial problems
• Rely on manual AS - • COVID-19 worsened late payments • Financial issues as
highest costs and time some banks struggle
with debt restructuring
• Tax disincentives -
firms feel discouraged
to take debt
forgiveness
RECOMMENDATI
5.1 Digitalization of Accounting :
ON• Benefits: Reliable financial statement preparation,
improved financial performance evaluation, and cost
efficiency through automation.
• Challenges: Network dependencies
RECOMMENDATI
5.2 Trade Credit Management :
ON• Key aspects for enhancing trade credit management
include policy, people, processes, and practices.
• E stablishing clear credit policies, involving proactive
credit managers, implementing robust risk assessment
processes, and providing education in credit
management practices are essential for minimizing late
payments and fostering stronger business relationships.
RECOMMENDATI
5.3 Policy S upport
ON• E ncouraging formal accounting practices among S MEs
enhances transparency and access to institutional credit.
• During economic crises, targeted government support
and special in-court procedures can help SME s sustain
operations, implement restructuring measures, and
negotiate debt restructuring plans.
CONCLUSIO L A R A N A , IN C .
N
• Challenges such as limited resources,
late payments, and legal obstacles
significantly hinder effective debt
collection for SMEs.
• Future work should prioritize
digitalizing accounting processes,
improving trade credit management,
and advocating for supportive
government policies.
