Late payments are “crippling” small business owners.

14th January 2020.

James Salmon, Operations Director.

SMEs owed £50bn in late payments

UK SMEs are “crippled” by late payments with businesses chasing more than £50bn worth of invoices, according to a survey of 1,000 CEOs, founders, directors and senior management at SMEs.

New research from digital banking platform Tide revealed that UK SMEs are chasing an estimated £50bn in late payments with the average small business chasing five outstanding invoices at once, wasting an hour and a half every day.

As well as spending one-and-a-half hours a day following up late invoices, the average small business is owed £8,500.

London-based businesses are the hardest hit with an average of seven invoices outstanding and they spend 2 hours a day chasing them.

SMEs based in Scotland experienced the second-worst rate of late payment, with an average of six unpaid invoices and an hour-and-a-quarter spent pursuing them.

As a small business, how much time do you lose to chasing late payments?

With 5.9m SMEs across the UK, they are owed over £50bn in late payments.

Oliver Prill, Tide’s chief executive, said: “It has been known for a while now that late payments are crippling SMEs, with the government having tried a number of times to address the issue. It is however shocking to see exactly how much time SMEs, and particularly the self-employed are wasting by having to chase clients to pay promptly. Cash flow is crucial for SMEs, and just a few late payments can tip them into danger of becoming insolvent.”

In 2019 the government announced large businesses would be required to review and report on payment practices as part of efforts to tackle late payments. The Federation of Small Businesses warned that 84% of small businesses within supply chains claimed to have been paid late.

Late payment is still a massive problem for small business

Those with the entrepreneurial spirit who take the leap of faith it takes to start a business for themselves usually focus on getting enough work to be a success.

However few realise that actually getting paid or not is the biggest  determinant in the success of small businesses.  Late and bad payments kill more small businesses than any other factor.

And getting payment from late and bad payers can cause the most stress and headaches. Indeed as we wrote last year, it can even lead to mental health issues.

Late payments cause mental health issues for 90% of bosses in the construction sector

It’s a big issue. There are almost five million self-employed people in Britain, making up 15 per cent of the country’s workforce, according to statistics published by the Office for National Statistics in September.

Over 50,000 small businesses go bust every year because of late payments and the effects on cash flow and it is the very smallest  and youngest businesses and the self-employed who bear the biggest cost.

Over half of small business owners have used their personal savings or friends and familys’ money to keep their businesses going because of late payments, according to a report published this year by Xero, an online accountancy platform.

The report, which surveyed 500 small business owners, found that almost half of invoices issued were paid past their due date. More than three quarters (76 per cent) of owners agreed that having their own business would feel more “worth it” if cashflow was not such a problem.

Big business holds all the cards

The fact is that larger businesses usually hold all the cards when negotiating and can force small business suppliers to accept long terms and bad paymnt practices. the inherent power imbalance encountered when supplying larger businesses.

Small businesses can’t afford to rock the boat and don’t have the clout to demand better terms.

They in turn then have to pass the late payments on to their suppliers and the late payment culture spreads quickly through the UK business world.

Those late payments stop businesses from being able to grow naturally, the lack of cash flow and capital can restrict the options available and the ability to invest.

When you don’t know when the late payment will arrive, you can’t plan for the future.

Microbusinesses, those employing fewer than ten people, account for 96 per cent of all businesses in the UK and the owners of these small ventures are the most susceptible to the scourge of “supply chain bullying”, according to Alastair Hutchison, policy development manager at the Association of Independent Professionals and the Self-Employed.

Mr Hutchinson said “They don’t have the same legal and administrative support that even a small or medium-sized enterprise might have, so they find it hard to enforce their rights,”

he added. “Your relationship with your client is paramount when you’re operating on your own and you don’t want to put that at risk by chasing invoices.”

For freelancers already losing time chasing up late payments, entering into an uncertain and expensive legal process to resolve a payment problem is unlikely to be feasible.

As Mr Hutchinson puts it “The hurdles of chasing via a legal route are symptomatic of the fact you won’t have a legal team to help or administrative support to back you up,”

Some sectors are hit more severely by late payments than others, small businesses in the construction and creative sectors often especially badly hit.

One in every three people working in the creative industries is self-employed, compared with about 16 per cent across the workforce as a whole.

Imagine being a freelance writer, expected to start on a long project without any idea of when you can expect to get paid.

The legislation

According to the legislation, the maximum payment terms, outside of extreme circumstances are 30 days for public authorities and 60 days for business transactions.

Businesses are legally entitled to charge interest and compensation on late payments but few do so because their are either unaware of the law or out of the fear of losing work.

Instead many small businesses and self employed people walk away from potentially lucrative work because they can’t be sure they will get paid. Some refuse to work on credit, cutting them off from much work.

The governments role

The government has pledged to “clamp down” on late payment and to increase the power of its small business commissioner, who can mediate on payment disputes, to support small businesses that are exploited by larger companies they supply.

Queens Speech brings welcomed promise on late payments

However, Paul Uppal, the former small business commissioner,  questioned the government’s commitment to tackling the issue, claiming that he was not given enough resources. He stepped down in October last year.

Greater resources needed to fight late payments to SMEs

Suzanne Burke, the acting small business commissioner, argues that the office has made a difference by naming and shaming companies including Astrazeneca, IBM and Unilever for poor payment practices.

She commented “People that didn’t engage with us then suddenly do engage with us because it’s reputational damage,”

Although the commissioner’s office can encourage payment, it doesn’t have any enforcement powers (yet).

“We have no way to compel large businesses to speak to us, that is something that is being looked at at the moment,” Ms Burke said. “A lot of the larger companies we work with talk about their corporate social responsibility and for me it’s key that late payments are included in that.”

microbusinesses crippled by financial administrative tasks

Microbusinesses spend the equivalent of ten weeks every year sorting out their finances, with over a third of small business owners saying that their personal lives are affected by the sheer volume of financial administrative tasks that they must get through.

A total of 11 per cent of microbusiness owners said that worrying about financial tasks had kept them up at night and one in twenty owners said that it had made them ill, according to new research published by Starling Bank, the mobile phone-based banking service.

The smallest businesses were said to be spending almost 20 per cent of their time, or 15 hours a week, on financial administrative tasks such as filing tax returns or chasing up the payment of invoices.

There are 5.6 million micro businesses in the UK and collectively they turn over almost £1 trillion a year.

With all small businesses (micro or bigger)  and indeed even some larger ones (and thus the UK economy) being  crippled by late payments, action is needed to end the late payment culture.

Our entrepreneurs need to be freed to grow and expand, to thrive, not spending hours a day chasing payments, suffering sleepless nights worrying about cash flow, and damaging relationships with family and friends by borrowing money to try and stay afloat.

At CPA we believe the legislation can be used retrospectively to end the late payment culture

CPA is passionate about late payment

The Credit Protection Association has been protecting smaller firms against poor payment practices for over 100 years.

We are extremely passionate about breaking the late payment culture that holds back the UK economy and threatens many SMEs with cash flow difficulties being the single biggest killer of Britain’s small businesses.

If you were regularly paid late we can help. Those former customers used you to boost their own cashflow, regularly paying you late.

As a result you had extra costs, you had the distraction of having to chase payment, you had opportunity costs because your capital was tied up in their late invoices.

Under little used legislation, you are entitled to compensation for those late payments.

Now you can boost your own cash-flow.

CPA can help unearth the those hidden treasures.

We have the technology to reveal the compensation you are due and we have the extensive experience and expertise to then turn those claims into cash.

Yes, CPA can help you boost your business cash-flow.

Don’t let your bankers control you, contact CPA today.

The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections

Read our blog here on how to crack down on the late payment culture.

Read our blog here on how to give late payers the slap they need.

The “Why” of the late payment culture.

New PM should walk the walk and back small firms over late payments

Paying late is “crack cocaine” to big business.

Late payment culture risks “spiraling out of control”

visit our late payment compensation page

See our full blog and FAQ on late payment compensation

Do you realise you could be sitting on a fortune?

Late payments often result in a cash flow crunch and leave SMEs in need of a cash injection.

If you sold B2B on credit then there may be a hidden source of capital you can call on.

If you fancy an bit of extra cash in your business, rather than jumping through hoops with your bank, you could look to uncover the resources from an unexpected source within your own business.

Not many are aware but there could be a hidden fortune within your business, sitting there, just waiting to be uncovered and released.

We can help you uncover the pile of gold, you didn’t even know you were sitting on.

If you trade with other businesses and were often paid late then you could be entitled to significant compensation.

Under little known and under-utilised legislation your business could be due huge amounts in compensation that you didn’t even know about.

Let’s be clear – this is not a way to weaken any customer relationships you value. It is one that identifies who’s been paying late and then recover the potentially significant sums in compensation using Late Payment Legislation from businesses where the relationship has already ended.

You can pick and choose who you want us to follow up – but once we’ve agreed which companies you’d like to pursue compensation from it’s a fast process and there’s no financial outlay to you whatsoever. My team at CPA put its expertise to work to recover the compensation due and fight late payment culture.

That compensation could provide the cash boost your business needed.

But don’t delay, that compensation evaporates if not claimed within six years of the late payment.

How can CPA help?

CPA has developed a unique technology to dig into your accounting records and discover the cash injection you are due by means of compensation. The software does all the hard work. Our software interacts over the cloud with over 300 different software packages, working directly with your accounts package, just so long as it’s stored on a computer.

We recognise that most companies do not have the resources to spend time on the identification and calculation of Late Payment Compensation. Our service can produce an Analyses within just a few days with (usually) less than 30 mins of co-operation from our clients. We work directly with over 300 accounting packages but can also work with bespoke accounts packages. Indeed, speed is essential as the oldest invoices may fall foul of the 6-year time limit.

Once the Sales Ledger Analyses is made available to clients, all that is required is that management decide which commercially sensitive ex-customers to remove from the list and return it to us.

CPA then uses its years of collection experience to explain and recover the Late Payment Compensation Claims. Clients do not handle any part of the recovery process as our team will take all communications from the companies against who the claims has been made. Often, it’s simply a case of explaining the legislation, sometimes we have to go all the way and enforce the legislation through the courts.

The result is that we are realising clients’ claims worth tens and sometimes hundreds of thousands of pounds which, of course, is pure net profit.  You may also be among the recipients of “hundreds of thousands of pounds” should you elect to take advantage of our services.

We do the work, you receive the cash.

If you have supplied goods and services to businesses on credit and were regularly paid late then you could be due significant sums in late payment compensation.

We are talking to companies and unearthing claims in the hundreds of thousands from former business customers who paid them late. Large business customers who abused their power to inflict unfair and sometimes illegal payment practices.

We are helping business owners  who are looking to boost the returns from their business before they retire. We are helping businesses who have lost major clients after years of loyal service to get properly compensated for systematic late payment. We are helping companies that were looking to close down, who looked insolvent and finding that cash injection they need to avoid insolvency.

Those former clients who regularly paid you late can finally be made to pay.

Ready to speak to an advisor?

For help or advice on credit management, entirely without obligation.

Call us today

0330 053 9263


Do you sell on credit?

With pressures on the cash flow it is essential that you stay on top of the credit limits you grant customers and watch carefully for any late payments.

Those customers will look for the easiest option  to boost their cash-flow. Don’t let it be you.

You can’t just assume your customers can and will pay you eventually, no matter how big their name is.

It is essential to have credit management systems in place to monitor and check your customers credit worthiness.

It is also best practice to use a trusted third party like CPA to make sure you are paid on time by customers, no matter how good a name they have.

About CPA

The Credit Protection Association can help!

Formed in 1914, CPA has been providing credit management services to SMEs for over 100 years.

At the Credit Protection Association, we provide first class credit information that can help you avoid being over extended to customers who are at risk. Our monitoring service can flag up warning signs long before the end, giving you the chance to adjust and reduce your exposure. We provide recommended credit limits and credit scores on a traffic light system and can help you set appropriate credit policies for your customers.

We regularly publish lists of the latest insolvencies but by then it is too late. Our credit reports however predict approximately 96% of company insolvencies long before they arrive.

Companies in trouble usually have very bad cash flow and they try to deal with it by delaying payment to their suppliers, increasing your exposure to them.

If you supply on credit, help us help you identify the risks.

Why use a third party collector?

As a third party collector, we can also get your payments prioritised over those who are not as hot on collections. When your customer receives a letter from the Credit Protection Association regarding their outstanding account, they are going to want to get that resolved as a priority. Our overdue account recovery service can get your unpaid invoices to the top of their “to do” list and get your invoice paid.

Over the years we have collected billions in overdue invoices for our customers.

Our debt recovery and credit management services give our members the financial freedom needed to grow and prosper, while our new Late Payment Compensation department could unlock hidden potential and offer the compensation needed to springboard your business to success.

You might be hesitant about contacting a debt collection agency. What are they going to be like?

Can they help your particular type of business?

There is no need for concern. CPA are courteous, helpful and very probably have had direct experience of working with your type of business.

Debt collection agencies are not all alike.

Success lies in both recovering money and keeping customers happy. The Credit Protection Association was founded in 1914 and  has helped tens of thousands of UK businesses to collect outstanding payments and reduce the risk of incurring bad debt. We believe that creditors deserve to be paid for the work or goods they have supplied but we fully understand the need to maintain
the best possible relationship with customers!

At The Credit Protection Association, we provide solutions, advice and back-up in all areas relating to the supply of services or goods on account. Client-members receive everything they need from a single source to reduce debtor days and write-offs.

The Credit Protection Association has helped has assisted tens of thousands of UK businesses with their credit control requirements, since the First World War.

We are polite, firm and efficient when it comes to recovering outstanding debt.

“We have used CPA for a number of years now. The website is easy to navigate around with lots of helpful reports. The staff are always at hand and very friendly. CPA has  helped us reduce our debt over the years and keep track of potential issues with our customers.”
~ CPA client in Buckinghamshire

“The service from CPA has proved to be everything that you said it would be. We have already seen a huge benefit. We have had a number of overdue accounts paid promptly and directly to us. It is also a huge weight off our mind to know that once we have passed an overdue payment over to you, you take care of everything whilst keeping us informed.
~ Credit Controller client in Warrington

The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections


Ready to speak to an advisor?

For help or advice on credit management, entirely without obligation.

Call us today

0330 053 9263

The Credit Protection Association is a credit management company established in 1914. If you supply goods or services on credit then we can help you!

The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections

Keep up to date with the latest news by following us on social media:-

CPA on Linkedin

CPA on facebook

CPA on twitter

See all our latest news here!

Housekeeping: Opening a New Account

Late payments are never good for business. What can you do?

Get paid earlier by understanding why late payments happen.

Protecting Your Business isn’t Half As Painful As You Think

The Good, the Bad and the Ugly – recognising the types of payers you do business with!

See our blog on how to communicate with your debtor early and clearly to set the framework for prompt payments

Everything You Always Wanted To Know About Debt Recovery (But Were Afraid To Ask)

Understand the “why” behind late payments

Read our blog on what to do when not paid on time

10 Bad Habits Every Credit Controller Should Give Up

The Credit Controller’s Best Friend

Debt Recovery: It’s Easier Than You Think!

How Managing Your Cash Flow Can Make You (and Your Business) A Success

Avoid insolvency – Don’t let your money go up in smoke

Read our blog here on how to crack down on the late payment culture.

Read our blog here on how to give late payers the slap they need.

25 excuses for late payment and how to get around them.

Read our Cash Flow Advice

Read about our overdue account recovery service

Read our blog – What is credit management?

Read our blog – How to select a debt collection agency

20 ways to avoid identity theft

see our blog – 15 steps to avoid invoice fraud

Overcoming 5 common reasons for disputed invoices

As insolvencies rise, could you spot these warning signs in your customers?

The Credit Protection Association – Prompting Punctual Payments – Ethical, Effective, Efficient, Economical collections