Late payments costing small businesses billions

The UK’s sole traders and small businesses could be owed up to £2.5 billion each year because of late payments, a new survey reveals.

A study conducted by WorldPay among over 1,000 small businesses found that 75 per cent of the companies asked said that they had to deal with late payments last year. Furthermore, an estimated £2.5 billion could be owed by said late-payers and, more worryingly, the vast majority of this outstanding debt – as much as £2.4 billion a year – gets written off.

The famous Italian politician, philosopher and writer Niccolò Machiavelli once remarked “tardiness often robs us opportunity”. Though writing during the Renaissance around 500 years ago, his words still ring true today; these late payments have a serious knock-on effect on small businesses.

While small businesses are often the ones least able to cope with outstanding payments, this new research clearly illustrates that unpunctual customers are a weighty burden they have to bear. Moreover, as is often seen to be the case, outstanding payments can play a big role in determining the fate of small business’ future, particularly those that may find themselves teetering on the brink of administration.

The problem is getting worse too; nearly 40 per cent of those asked stated that late payments were a bigger issue than this time last year, while just under half (45 per cent) said they have had cash flow problems because of it.

The WorldPay survey revealed that individual customers were the biggest culprits, according to 60 per cent of the respondents. Less than two fifths (17 per cent) said the large businesses are the worst when it comes to paying on time.

The UK’s small businesses don’t seem to feel things are going to change either. Whether it can be put down to acceptance or a lack of optimism is unclear, but concerningly 76 per cent of those asked claimed that they thought late payments were always going to be a part of their day-to-day operations, regardless of what they did.

However, David Hobday, Managing Director WorldPay UK, stressed that this is a serious problem that needs to be addressed. He said: “Running a micro-business is hard enough without chasing hard-earned money too.

“Customers may think that they can get away with stalling payments, but small businesses don’t have to put up with it. Late payments have a huge impact on cash flow and a knock on effect for everyone.”

Perhaps small businesses ought to take a leaf out of Machiavelli's book The Prince by becoming more ruthless in their pursuit of their own goals. But for those on the look out for distressed businesses to buy, the issue could throw up a few more opportunities for more cash-rich buyers who can afford to fund gaps between payments.

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