Over 70 per cent of SMEs in the construction sector have written off money as bad debt over the last three years, losing an average of £30,465.
Research from Bibby Financial Services also found that nearly 60 per cent of businesses claim they do not always receive payment equal to what they have invoiced for.
Late payment, a shortage of skills and government red tape were highlighted as the three biggest challenges facing SMEs.
Red tape was a primary concern for 40 per cent of SMEs surveyed, while 46 per cent cited the skills shortage as a key issue affecting their business.
But 49 per cent of SMEs reported that they had more work in their pipeline during Q4 2014 than in the same quarter the year before, while only 9 per cent had less work than a year earlier.
The survey also found that firms had an average of 17 weeks’ worth of work in their pipelines. SMEs in the West Midlands had the healthiest pipeline nationally, with an avereage of 45 weeks of work.
Most SMEs are still reliant on commercial contracts, with 46 per cent saying they are the greatest source of work, followed by government and local authority contracts, cited by 17 per cent of respondents.
Over 90 per cent of respondents felt that national construction projects did not benefit their business.
Furthermore, only 9 per cent of SMEs saw housebuilding contracts as the best opportunity for growth.
Opinions on the impact of Help to Buy on the sector were mixed; 37 per cent of SMEs felt that it had benefitted the construction sector overall, while 22 per cent said that it had not.
Over 40 per cent of businesses employ one or more apprentices, but while 54 per cent of SMEs would like to see more apprentices in the sector, only 10 per cent plan to create apprentice roles within their company.
Commenting on the survey, Helen Wheeler, managing director of construction finance at Bibby Financial Services said: “Subcontractors often work on contracts where completion dates are one, two or even three years down the line and regularly they won’t get paid until the entire project is completed.
“But even then payment isn’t necessarily guaranteed.
“Many of the businesses we speak to have suffered bad debt, which have significantly hindered their ability to pay workers and suppliers.
“In many instances these bad debts have forced viable businesses to close.
“When it comes to apprenticeships, many smaller construction firms simply don’t have cashflow to enable them to do this and when it comes to a choice of whether to take on an extra member of staff or pay existing workers and suppliers, it’s a no-brainer.”