The UK is in the grip of a late payment crisis, and the media can't stop talking about it. According to recent reports, small businesses are owed £50 billion in overdue payments, and the problem is only getting worse.
The systemic culture of late payments is having a devastating impact on cash flow and business growth. In this article, we'll take a closer look at the issue of late payments in the UK and discuss what can be done to solve it.
The UK late payment crisis
Late payment of invoices is a huge problem for small businesses in the UK. A recent study by the insolvency trade body RSM found that corporate insolvencies doubled in 2021, with the main culprit being cash flow issues caused by late payments, and the problem is only getting worse.
The impact of late payments on cash flow can be devastating. When invoices go unpaid, business owners can find themselves struggling to pay their bills and cover their costs. This can cause businesses to collapse, leading to job losses and reduced economic growth.
While problems that have the majority of their impact on smaller businesses often fly under the radar, the late payment crisis has become so serious that it has caught the attention of major media outlets.
Three in five UK businesses are owed money from late payments
In 2022, Barclays reported that three in five SMEs are owed money from late payments, with the average amount owed standing at £31,000. This is an increase of 50% since 2016.
This data paints a worrying picture for small businesses in the UK. Late payment culture is causing major cash flow issues and preventing many businesses from thriving.
The problem is even more extreme for freelancers and the smallest businesses. Of those companies employing up to 249 staff, a staggering 94 per cent have been affected by late payments.
The Covid-19 pandemic is also worsening the issue, with 40 per cent of SMEs reporting that their late payment problems have worsened in the last year.
Interestingly, the Barclays article also highlights the backlash against the culture of late payments. According to their research, 80 per cent of suppliers would refuse to do business with companies that have a reputation for consistent late payments, while 58 per cent of customers reported that they would boycott late-paying companies.
The article also highlights the personal impact that consistent late payments have on small business owners. Around 39 per cent of SME owners reported that late payments have impacted their mental health, while 27 per cent said that it has impacted their personal relationships and home life.
UK's late payment crisis risks the future of 440,000 small firms
An article in the Guardian highlights the devastating impact late payments can have on smaller businesses, with many being driven into insolvency because of the culture of late payments.
Cash flow is critical for small businesses, and the lack of it can be crippling. The article points out that SMEs in the UK are owed billions in late payments, which is hampering their growth and ability to create jobs.
Research by the Federation of Small Businesses indicates that the future of around 440,000 small businesses is at risk due to late payments.
One of the main reasons for this crisis is that large companies are taking advantage of their position and delaying payments to smaller suppliers. This not only creates financial problems for the small businesses, but also affects their ability to deliver goods and services on time, which can damage their relationships with their own suppliers and customers.
Far from getting better, the survey by the FSB indicates that the issue is getting worse, with 30 per cent of small businesses surveyed reporting that they had experienced an increase in late payments over the past three months. This is despite the fact that 89 per cent of small businesses say that being paid on time is critical to their survival.
The culture of late payments is having a devastating impact on small businesses, which are vital for economic growth, and it only seems to be getting worse.
What can be done to combat the late payment crisis?
It's clear that the media can't seem to get enough of this issue, with countless articles and reports being published on the topic. This is a good thing, as it helps to raise awareness of the problem and puts pressure on lawmakers to take action.
However, more needs to be done to solve the late payment crisis!
The government has also recognized the seriousness of the problem and is taking steps to address it. In 2018, it introduced new legislation that makes it easier for small businesses to chase late payments.
The law requires large companies (with more than 250 employees) to reveal their payment practices, including the average time they take to pay suppliers.
This is a step in the right direction, but more needs to be done. In order to really solve the problem, we need businesses and consumers alike to change their attitudes towards late payments.
Businesses also need to be more proactive in chasing payments, putting more pressure on habitually late-paying customers to pay on time. However, this kind of pressure normally takes time and resources, which smaller businesses might not have.
That's where Chaser comes in!
How Chaser can help small businesses overcome late payments
Chaser is a market-leading credit control platform that helps small businesses get paid on time, every time.
The Chaser platform automates the chasing process, taking the burden off of small businesses and allowing them to focus on what they do best.
This not only saves valuable time and money, but it also means that businesses are more likely to get paid in a timely manner.
Chaser uses a number of methods to get businesses paid, including automated email and SMS reminders, built-in credit checking, and a host of other amazing features.
Automated payment reminders
Our research has shown that persistent, omnichannel chasing of unpaid invoices is the best way to get paid faster. But being on top of every unpaid invoice in your accounts receivables takes time and time is money.
However, with Chaser, our platform does all the hard work for you. Chaser's automated payment reminders will help to get your invoices paid on time, without any of the hassle.
Your invoice reminder templates can be edited to reflect your company's branding and tailored to include specific payment information. You can also choose the frequency of your automated reminders, whether it be daily, weekly or monthly.
Our platform now includes SMS messages, which have a higher open rate than email. This means that you can get your invoices paid even faster, with just the click of a button!
Best of all, Chaser's automation guarantees that all unpaid invoices are chased consistently, so you can focus on more important tasks.
The ability to leverage the benefits of automation, without losing the human touch, is why our customers get paid, on average, 16 days sooner and experience a 25% reduction in days sales outstanding.
Built-in credit checking
Credit checking your customers is the foundation of a healthy and efficient accounts receivable process. Chaser's credit checking tool allows you to quickly assess the risk of doing business with any company, so you can make informed decisions about who to invoice and when.
Additionally, while most companies perform a credit check during the onboarding process, Chaser makes it quick and easy to credit check your customers on a regular basis.
This, coupled with the ability to monitor payment behaviour from the Chaser Hub, allows you to stay on top of any changes in credit risk and protect your cash flow.
A new take on debt collection
Traditional debt collection agencies have a reputation for being difficult to use and for running the relationships you've worked hard to build with your customers into the ground.
At Chaser, we believe that debt collection doesn't have to be a dirty word. In fact, our innovative approach to this critical stage of the invoicing process allows you to maintain control of your customer relationships while still recovering what's rightfully yours.
Our expert team uses polite persistence and meditation to get your customers to pay up, without damaging the relationship you've built.
Even better, because all of the required payment and invoicing information is stored in the Chaser Hub, you can escalate a case to our debt collection team with just a few clicks!
Chaser's approach to debt collection is not only more effective than traditional methods, but it's also more polite and respectful. This means that you can continue doing business with late-paying customers, without having to worry about your bottom line.
Helping businesses overcome the late payment crisis
Chaser's innovative approach to credit control has allowed our customers to recover £3 billion in outstanding invoices at a time when getting paid on time is more critical than ever.
To find out how Chaser can help your business overcome the late payment crisis, please get in touch to book a demo or start your free trial today!
