£26 billion is owed to UK small businesses in late payments, costing the UK £2.5 billion a year. These figures come from the Federation of Small Businesses here in the UK, who reported on late payments and their impact on the economy.
The Rock and the Hard Place
The issue of payments coming through late can be hard to deal with is because of the relationships connecting companies. Start-ups and other small businesses rely on larger businesses, like suppliers, to keep their business stocked. If a supplier’s late on a payment: do you chase them? Maybe, but this will cost you time, money and your relationship with your supplier. Or do you wait it out, burning some of your financial reserve?
Many small business owners have taken the impact of late payments on their own shoulders. Business owners sacrifice their own salaries for their business, when late payments turn into heavy costs. The impact stretches into their personal lives, causing small business owners to have trouble paying rent or forcing them to push things back, in their personal lives, that they can’t afford.
The cascade of effects can overflow from a simple money matter into much deeper personal concerns. xln report that 29% of small business owners have suffered anxiety, depression and other mental health hazards due to stress brought on by issues with businesses being consistently late on payments.
What Can You Do About Late Payments?
New guidelines have been brought in to help with payments issues. Though 79% of small business owners don’t think the new guidelines are going to solve the issue. The legislation is intended to name and shame businesses that consistently late pay. Small business owners are worried that big businesses would spend their resources sidestepping the new legislation, rather than getting on top of their late payments.
For now, all we can do is wait and see. The new government will be under pressure to optimise legislation on late payments. However if nothing is done small businesses will still have to deal with these issues for a while longer.
In the meantime, find xln’s full article on late payments here.
If you have any questions about late payments, please get in touch here.