53% Of Business Owners In The North East Suffer From Stress, Anxiety Or Depression Caused By Late Payments

A survey conducted this month by Juno, the digital payments platform, shows that the late payment crisis is impacting small business mental health. 63% of small businesses (53% in the North East) claimed they were suffering from stress, anxiety and/or depression as a result of cash flow issues caused by late payments.

A further 2 in 10 businesses said they were at risk of bankruptcy or business closure and 1 in 10 are thinking of making or have made redundancies. The survey, of 500 self employed people in the UK, showed that those working in legal, manufacturing and retail sectors are most impacted by stress, anxiety and depression. The impact is felt the most by younger business owners with over 78% of those aged 21-30 years claiming cashflow was having a negative impact on their mental health.

Juno’s report, ‘The real cost of late payments in the UK’, paints the clearest picture of late payments yet and these startling findings suggest that the culture and status of late payment in the UK has reached crisis point.

As many as 50,000 businesses already close every year due to late payments, and the pandemic is thought to have exacerbated the issue according to the Federation of Small Businesses.

“The problem of late payments has been around for a while but that does not mean that we should accept it,” said Juno’s Co-founder and Chief Product Officer Pete Bailey.

“Businesses are facing a crippling crisis caused by a culture of late payments which continues to have a negative impact on their cash flow, ability to focus on growth as well as mental health and wellbeing.

The report includes the findings of an additional survey conducted by YouGov during the pandemic (500 British businesses with up to 49 employees). This highlighted the slow adoption of digitisation with nearly half of all businesses (47%) still creating invoices manually (68% of sole traders).

Other highlights from the research were:

83% of businesses with 10-49 employees are paid late.
68% of all UK businesses are paid late, with London being the worst affected (78% of London businesses are paid late compared to 69% in the North East). Over half (55%) of sole traders were not paid on time.
Time spent chasing for payment - 62% of businesses chase their clients extensively for payment; instead of focusing on their next client or project which impacts their ability to grow.

Every sector of the economy is impacted - The communications sector suffers the most with 91% of media, marketing, PR and sales businesses regularly paid late. This is closely followed by legal businesses (81%), construction (72%), education (73%) and hospitality and leisure (55%). Retail is the least affected sector but still has almost half of firms being paid late (44%).
The lengths they go to - Some businesses put pressure on the accounts team and then threaten legal action, while others say this is futile and instead opt for delaying the payment of staff salaries, using an existing overdraft facility or applying for a loan.

Solving the small business late payment crisis is vital since SMEs lie or die on their cash flow. However they often feel trapped by the terms and actions of larger organisations.

Liz Barclay, the UK Government Small Business Commissioner, comments: “Unfair supplier payment terms mask the full extent of how late payment impacts businesses. It affects their cash flow and the mental health and wellbeing of owners and employees, which has a knock on effect on employment and economic growth.

“This needs to change. As we build back better, fair and prompt payment should be an essential component of corporate governance. Companies that subject suppliers to unfair payment terms or pay late are not acting ethically and responsibly and should consider the longer term impact on their corporate reputation. Every business needs to play their part in creating a culture and a system of prompt payment.”

Juno developed its payments platform to take the stress, cost and complexity away from chasing and managing payments.

By digitising the manual processes businesses can stop wasting time spent chasing payments. They will have better visibility of what’s owed, are less likely to forget to chase or have communication lost and, ultimately, improve cash flow.

Pete Bailey concludes: “Unfair payment terms, lack of automated processes and lengthy invoice chasing procedures are all adding to the risk of payment delays. Bigger businesses that adopt unfair or late payment practices, should not be surprised if their suppliers aren’t there in the future, which could impact their supply chain.”