Firms ‘under threat’ from late payments

Research carried out by the Federation of Small Businesses (FSB) last year revealed that 440,000 small firms are under threat from late payments and could be forced to close due to late payments alone.

Almost a third of small businesses (30%) surveyed told the FSB that they had seen the late payment of invoices increase, with at least 8% warning that the problem had become so bad that it was threatening the viability of their business.

For years, the threat from late payments – often by big FTSE firms – has dogged the small business sector. Firms are often forced to pay their suppliers, wages and other bills on time, but face long waits to be paid themselves.

The FSB said more than 400,000 small firms have shut down since the start of the pandemic for various reasons, and that the future of a similar number is now threatened by this problem alone.

In addition to the pressure late payments and poor cashflow place on small businesses, their owners and their families, poor payments practices are also having a negative impact on UK economic growth.

The UK Small Business Commissioner says 20% of small businesses have run into cash flow problems due to late payments and, if small businesses were paid on time, the UK economy would benefit by £2.5bn a year.

The Commissioner has also stated that one third of all payments to small businesses are currently paid late – with every late payment averaging £6,142.

One step small businesses can take to fight back against the scourge of late payments is to rate and review the companies they work with on Checkapayer. This service allows small business owners, contract works and freelancers the chance to see exactly what they are getting into before starting to work with a new company.

For more tips and advice on how to maintain prompt payments, click here.