# Why late payments are hurting your customer, as well as your business Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2021-10-28 Category: BUSINESS Category URL: https://financedigest.com/category/business Meta Title: Late Payments: The Silent Business Killer in the UK Economy Meta Description: Discover how late payments are costing small to medium sized businesses in the UK billions each year and what you can do about it to protect your own business. URL: https://financedigest.com/why-late-payments-are-hurting-your-customer-as-well-as-your-businesshtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/handsome-businessman-showing-his-empty-wallet-sbi-300858470-1736837500263-compressed.jpg) _By_ **_Lynne Darcey Quigley_** **_,_** _Co-founder and CEO of_ [_Know-it_](https://know-it.co.uk/) _(Global) Ltd & Darcey Quigley & Co discusses how late payments not only hurt your business but will hurt your customer too._ It is a well-known fact that small is powerful, especially when it comes to business. In the UK today, companies with between 0 – 49 employees make up 99% of the total number of the c.6m companies currently operating in the economy. So, it is no surprise that SMEs make up such a large proportion of the country’s total turnover (around 52%) of UK businesses, as well as a significant chunk of the supply chain. But there is an issue that costs the economy a staggering £2.5 billion a year and cripples the backbone of the country’s hard-working SMEs – [late payments](https://www.financedigest.com/the-late-payments-toolkit-how-to-keep-the-cash-flow-strong.html "THE LATE PAYMENTS TOOLKIT – HOW TO KEEP THE CASH-FLOW STRONG"). Even if your own [business is not a small](https://www.financedigest.com/10-dirty-tricks-for-small-businesses-to-watch-out-for-when-negotiating.html "10 dirty tricks for Small Businesses to watch out for when negotiating") to medium sized, there’s a good possibility that your customers and suppliers are. In which case, the impact late payments have on these [companies](https://www.financedigest.com/the-severe-impact-of-downtime-on-companies-bottom-lines.html "The severe impact of downtime on companies’ bottom lines") can have a direct impact on you. Surprisingly, [businesses in the supply chain](https://www.financedigest.com/2023-supply-chain-trends-for-businesses-to-ensure-a-more-efficient-supply-chain-strategy.html "2023 supply chain trends for businesses to ensure a more efficient supply chain strategy") have become almost accustomed to being paid late with 74% of manufacturing companies experiencing regular late payments. Yet there appears to be a divide between the north of the country with London seeing overall late payments by 78% and Scotland suffering from late payments around 58% of the time (Juno.) In fact, in a report by [Sage,](https://www.sage.com/en-gb/news/press-releases/2017/12/half-of-uk-small-and-medium-businesses-expect-to-suffer-impact-of-late-payment-this-christmas/) the average time SMEs spend per year chasing late payers is 15 days. Why are these figures so stark? It may well be that there is a lack of confidence within the manufacturing sector where maintaining ‘good client relations’ often means turning a blind eye to [late payments](https://www.financedigest.com/the-impact-of-late-payments-on-sme.html "The Impact Of Late Payments On SME"). It still might not sound like an issue to larger organisations either, after all, big [companies reduce their own risk by ensuring terms and conditions keep](https://www.financedigest.com/keeping-an-eye-on-company-purse-strings-where-do-businesses-go-wrong.html "Keeping an eye on company purse strings – where do businesses go wrong?") their cash flow stable, but when we consider that around 50,000 businesses are failing every year due to late payments, which is around 1,000 a week, then it becomes a real concern. The [knock-on effect](https://www.financedigest.com/banking-turmoil-will-not-have-knock-on-effect-on-commodities-trafigura-cfo.html "Banking turmoil will not have knock-on effect on commodities -Trafigura CFO") means we are all at risk struggling to collect what we’re owed, and this late payment figure currently amounts to £61bn – an increase of 22% in the past year. **Why [SMEs aren’t the only businesses](https://www.financedigest.com/survey-finds-1-in-4-smes-frequently-face-business-process-errors.html "Survey Finds 1 in 4 SMEs Frequently Face Business Process Errors") to suffer** The problem of [late payments in the UK engulfs businesses](https://www.financedigest.com/technology-is-a-tonic-for-late-business-payments.html "TECHNOLOGY IS A TONIC FOR LATE BUSINESS PAYMENTS") and shows no sign of slowing down, but it’s not just smaller businesses that are suffering and at risk of collapsing. Yet, when these businesses aren’t paid, they are then unable to pay their suppliers, so more significant businesses [experience payment](https://www.financedigest.com/curating-a-fully-contactless-customer-experience-for-payments.html "Curating A Fully Contactless Customer Experience for Payments ") delays. The problem affects the whole [supply chain](https://www.financedigest.com/how-to-bring-immediacy-back-to-the-supply-chain-with-faster-payments.html "How to Bring Immediacy Back to the Supply Chain With Faster Payments"). No business ever wants to wait longer than they [need to for payment](https://www.financedigest.com/stay-ahead-of-the-curve-and-meet-your-customers-payments-needs.html "STAY AHEAD OF THE CURVE AND MEET YOUR CUSTOMERS PAYMENTS NEEDS"), so what can companies do to solve the issue? Without a doubt, the best way to recover any overdue invoices is to act immediately. As we have seen, [businesses with between 10 and 50 employees](https://www.financedigest.com/why-investing-in-employee-health-can-be-good-for-business.html "Why investing in employee health can be good for business") have an average of 7.5 invoices outstanding. If this is your customer, then it is a real [possibility that they have other invoices to pay as well as yours and as such being able to understand the knock-on effect](https://www.financedigest.com/the-brexit-effect-hits-uk-salaries-but-possibly-boosts-tourism.html "The Brexit Effect Hits UK Salaries, but Possibly Boosts Tourism") of the supply chain is equally crucial. So, businesses must get ahead and ensure they are first in the queue to get paid to help them [stay afloat](https://www.financedigest.com/digital-technology-and-startups-during-a-recession-how-to-stay-afloat.html "Digital Technology and Startups During a Recession — How to Stay Afloat") and in business. Enterprises large and small often fight hard to acquire their [customers and build](https://www.financedigest.com/how-do-you-build-customer-loyalty-3-steps-to-follow.html "HOW DO YOU BUILD CUSTOMER LOYALTY? 3 STEPS TO FOLLOW") strong brands. Yet, acquiring a [customer means nothing if you do not get paid for the goods or services](https://www.financedigest.com/revolutionising-customer-service-three-sectors-that-are-leading-the-way.html "Revolutionising Customer Service: Three sectors that are leading the way…") you provide. **[Planning for future](https://www.financedigest.com/heres-what-the-future-holds-for-financial-planning-analysis-teams.html "Here’s what the future holds for financial planning & analysis teams") cashflow** Once you have established a strategic [plan to act quickly on late payments](https://www.financedigest.com/how-the-epa-plans-to-boost-confidence-in-the-uk-payments-industry-post-brexit.html "How the EPA plans to boost confidence in the UK payments industry post Brexit"), collecting your overdue invoices will improve and maintain a healthy cash flow. Other areas of your business will start to prosper. You will be ready to invest in resources and people to help [grow the business](https://www.financedigest.com/5-ways-to-grow-your-business-despite-a-bad-credit-score.html "5 Ways to Grow Your Business despite a Bad Credit Score"). When you significantly reduce the amount of time you’re left waiting for overdue invoices, you will be able to concentrate on critical areas of improvement. [Reducing debtor days directly lowers the level of risk](https://www.financedigest.com/how-can-you-reduce-the-risk-of-fraud-in-b2b-payments.html "How can you reduce the risk of fraud in B2B payments?") your company is exposed to. One key area which tends to be overlooked by businesses is the [ability to identify](https://www.financedigest.com/new-gleif-challenge-facility-extends-ability-to-trigger-updates-of-legal-entity-identifier-data-to-all-interested-parties.html "New GLEIF Challenge Facility Extends Ability to Trigger Updates of Legal Entity Identifier Data to All Interested Parties") bad payers. Understanding which companies are a risk to your cash flow will help minimise the risk of late payments and so the having the ability to credit report and monitor, highlight obvious red flags and alerts of any [changes to your customers](https://www.financedigest.com/talk-to-me-the-changing-face-of-customer-communications.html "TALK TO ME :THE CHANGING FACE OF CUSTOMER COMMUNICATIONS") behaviour can be hugely important. In the current climate, where [cash is paramount, focusing on getting your cash into the bank will help you plan](https://www.financedigest.com/uk-energy-regulator-drops-plan-to-ring-fence-customers-cash.html "UK energy regulator drops plan to ring fence customers’ cash"), which is key to recovering the economy. It will also help relieve any pressure to delve deep into personal accounts to [pay bills](https://www.financedigest.com/uks-sunak-to-halve-support-that-helps-businesses-pay-fuel-bills-the-times.html "UK’s Sunak to halve support that helps businesses pay fuel bills -The Times") – giving back some well-earned security. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---