Majority of UK SMBs consider late payments “corporate crime”
More than half (55%) of the UK’s small and medium businesses (SMBs) think late payment is a corporate crime and should be greeted with as serious a sentence as those given for fraud or malpractice – potentially even a prison sentence.
SMB owners want the ability to secure compensation from late-paying clients. To do this, the businesses need to feel like they can take legal action against late payers without paying absurd fees and be confident that financial penalties could and can be slapped on late payers.
This is according to a report from FreeAgent, which surveyed 1,000 participants and found that more than half of the UK’s SMBs had felt forced to write off money because it had not been paid on time, while 20% said their write-offs had exceeded £1,000 and 4% saying they had exceeded £10,000.
A 2018 report from Bacs found an even higher average, saying the estimated cost of recovering overdue money for each business is now £9,000.
“For many small business owners, the reality of self-employment means battling to stay on top of vital admin, keep their cash flow healthy and chase late payers – all while attempting to maintain a good work-life balance,” says FreeAgent’s CEO and founder Ed Molyneux.
Chasing late payers was an issue for 93% of SMBs surveyed. Whilst some have waited as long 24 months for a payment, one in ten said they had clients who never paid them.
“Some business owners live from month to month, not knowing whether an unpaid invoice or problem client could severely threaten their livelihoods,” says Molyneux, who highlights the knock-on effects of burning out and poor mental health inflicted on entrepreneurs.
These numbers seem to resonate with UK Finance’s findings, in which 38% of businesses say they receive most invoice payments outside of terms – i.e. late.
The trade association puts this down to business size in part, pointing out the discrepancy between smaller business’ payment periods of 7-14 days and the industry average window of 30 days.
Despite the government creating a special position, the ‘Small Business Commissioner’, in December 2017 to try and tackle the issue of late payments, it still prevails as a top concern for SMBs today.