It follows that late payments will impact on company cash flow, but the personal cost for small business owners is discussed much less, if at all.
Research recently commissioned by the Prompt Payment Directory has identified the personal cost of late payments for SME owners. More than a third (36%) of the SME owners surveyed had forgone their own remuneration as a direct result of late payments, with 21% experiencing difficulties in paying their mortgages or rent. Some SME owners reported having to sell their homes or use their savings in order to “plug the gap” caused by late payments.
As well as the financial impact of late payments, 29% of respondents to the survey also reported suffering stress, depression and other mental health issues as a result of late payment.
There are steps that can be taken to minimise the risk and/or impact of late payment, such as asking for payment in advance of delivering goods or services, assessing the credit worthiness of new and existing customers, and not extending credit to customers who are perceived to be a high risk.
Engaging a law firm at an early stage to chase late payments can have a very real impact on the speed of payment and does not have to be an expensive exercise. In the experience of our specialist Debt Recovery team, receiving a letter demanding payment from a reputable law firm will often result in an unpaid invoice being pushed to the front of the queue, which will be good news for SMEs and SME owners alike.