New research from Barclays has revealed how small business owners continue to be impacted by late payments from customers. The research, which polled 500 small business owners, found that 58 per cent of UK SMEs are currently awaiting payments from customers.
Late payments have been an ongoing issue for small businesses, self-employed workers and sole traders for several years now, but the problem has been significantly exacerbated by the COVID-19 pandemic. 40 per cent of respondents say that they have been more likely to experience late payments due to the impact of the pandemic.
Aside from the obvious negative impact on cash flow, profitability and scope for investment, late payments can also have other serious side effects, including damaging trust and harming the mental health of small business owners.
80 per cent of those polled in the study said they would refuse to work with a potential customer that was known to make late payments. Meanwhile, 39 per cent said that late payments had caused their mental wellbeing to suffer. 27 per cent said personal relationships had suffered due to late payments, while a quarter said they hadn’t been able to go on holiday over recent years due to being owed money.
The Prompt Payment Code (PPC) enables businesses to claim compensation and interest on late payments from businesses signed up to the programme. However, while 64 per cent in the poll were aware they could take action, only 23 per cent reported having done so, with many saying they were concerned this would result in them not getting further work with a customer.
Liz Barclay, Small Business Commissioner, said: “We welcome the bank’s commitment to make bigger firms face up to the consequences of paying their small suppliers late. The consequences for wellbeing and mental health can be catastrophic. But late payments are just part of the problem.”
“Repeated delays and excuses, and extended payment terms of 90/120 and even 360 days are common. Uncertainty kills small and micro businesses as well as freelancers and sole traders. As well as customers and would-be employees we need to see potential investors refusing to invest in firms that don’t treat small suppliers well. We also need this to be top of the Board governance agendas. A change in payment culture is decades overdue”.”
