The average small business is owed £24,841 in unpaid invoices. Act now!
Are you worried that your business will be paid late for invoices raised to customers over the Christmas period? The truth is that late or unpaid business invoices are not a Christmas period phenomenon – it happens throughout the year causing severe cash flow problems for those affected. Indeed, c.50,000 businesses in the UK go under every year as a result of cash flow issues caused by late payment. In this article our commercial debt recovery solicitors look in more detail at the numbers involved, the potentially severe consequences (including insolvency) and suggest that our experienced team can help.
Cash Flow Problems Caused by Late Payment
The Average UK Small Business is Owed Nearly £25,000
Recent research by Xero, the accounting software provider, into 2 million invoices shows that the average small business owner in the UK is owed £24,841 in late payments at any given time. Xero goes on to point out that this sum equates to:
- 11 months of the average staff wage in small businesses, with all the negative implications that has for staff retention
- 37 months of mortgage repayments (based on the average mortgage in the UK)
- 9 Family holidays
In other words, the consequences of late or non-payment reach into every facet of life, both business and personal, with the end-game being business closure if action is not taken.
The late payment culture in the UK appears to be getting worse, with small businesses often suffering disproportionately, as economist Vicky Price points out:
“Late payments tend to shift the balance in favour of larger firms either because they are the ones who benefit from paying late or can better withstand the working capital pressures if they themselves are having to cope with late payment of invoices by others.
And yet it is the millions of small firms that provide around half of the employment in the UK and much of the economy’s productivity and growth depends on them functioning in a healthy finance environment.”
Late Payment Occurs in All Business Sectors, But Some are Worse Than Others
The Xero research revealed the 10 sectors most affected by late payments:
- Wholesale trade (£42,989)
- Administration and support (£40,662)
- Transport, postal and warehouse (£31,555)
- Public administration and safety (£31,541)
- Electricity, gas, water and waste services (£31,309)
- Financial and insurance services (£29,732)
- Manufacturing (£29,123)
- Information, media and telecoms (£28,682)
- Construction (£25,880)
- Professional, scientific and technical services (£23,554)
The only conclusion to be drawn from this data is that no sector is immune from late payments. It is well known that the Government has been consulting on steps that might be taken to help ensure that small businesses get paid faster, especially in the aftermath of the Carillion liquidation, which highlighted the problem of late payment. What isn’t known is how far they will go and how effective any legislation will prove to be.
What Can be Done to Deal with Late Payments?
Good practices that any business should follow include:
- Credit check every company that you work with.
- Make it clear with an up-front contract what interest you will charge as a result of late payment. Ensure that you hold an “effective” set of terms and conditions and that they are incorporated into the contract (We can provide advice and assistance and a quote for drafting terms and conditions).
- Chase your debts early after becoming overdue.
However, the reality remains that no matter what steps you take, late payment will always be with us, which is where our commercial debt recovery solicitors come in.
Contact our Commercial Debt Recovery Solicitors for Help
Founded in 1978, Lane and Co is the UK’s longest established specialist Commercial Debt Recovery firm of solicitors. Our team of commercial debt recovery solicitors have recovered £millions of late payments on behalf of our clients, many of whom have been with us for 10 years or more. Click here to see some case studies and testimonials.
In most cases, a solicitor’s letter before action is enough to deliver payment. However, when that doesn’t work, or when a debt is disputed, we are experienced in using the right debt recovery tool that any specific debt related problem requires, from mediation to litigation and enforcement.
If your business is struggling with late payments, relating to the Christmas period or otherwise, please contact us or call us on 01922 616306. We have a completely open and transparent pricing policy, with the standard 7-day letter before action starting at £2.95 per letter (plus VAT). More importantly, we get the results that matter for your business.
Based in Walsall near Birmingham, we act for clients across the country.