Broken Britain’s Late payment culture hurting small businesses

Research from Shawbrook shows that nearly half of Britain’s 5.5 small businesses are resorting to cash flow from personal credit cards to tackle cash flow problems caused by late payments.

And we aren’t just talking about the one man bands. Even among the SME’s with a £25-£50 million turnover, 45 percent surveyed said they had resorted to personal credit cards to aid cash flow.

Staggeringly among the SME’s with a turnover over £100 million, 47 percent were still using personal credit cards.

40% of Small business owners were using personal loans and 46% were having to put their personal savings back into the business to tackle the cash flow crisis.

CPA has been helping tackle late payments for over 100 years.  We’ve long argued that so long as customers think paying invoices late is a free form of capital, then businesses will exploit their suppliers to boost their cashflow.

The problem is that their own customers will do the same to them, The domino effect of late payments through the supply system creates inefficiencies, holds back growth and diverts attention from productive activity.

If you make late payments expensive, customers will quickly adapt, and the payment cycle will speed up.

CPA has argued for increasing late payment compensation and mandating that businesses pay it.

CPA has been using its Late payment Compensation (LPC) service to help SME’s retrospectively claim compensation from their former business customers who paid them late.

In a study of the small businesses we’ve worked with, the average SME was due over £750,000 in compensation and interest.  Admittedly most of that was due from current customers who our clients chose not to pursue for the sake of the goodwill.

But goodwill is not a factor for every business due late payment compensation.

We are now starting to work with insolvency practitioners to claim compensation retrospectively from the former late paying business customers of insolvent companies  who have been forced (at least in part)  into insolvency by those late payers.

Insolvent businesses can claim all the compensation and interest they are due as maintaining customer goodwill is no longer an issue. Recovering interest and compensation on all the late payments they suffered in the past six years might be too late to save that business, but may boost the funds available to their creditors. Hopefully too, it will also teach businesses that they can’t assume late payments are as free a form of a cash flow boost as they might think.

If you’re a B2B supplier who has suffered from late payers, Or if you an insolvency Practitioner who is representing SME’s who have been driven into insolvency by late payments, contact us to see how we can help you get compensated.

Just call Peter Uwins, CPA’s National Sales Manager, on 020 8846 0000 (business hours) or email today.

When you see your money come in, you will be so glad you used CPA.

11 January 2024

James Salmon, Operations Director.