A new survey of small businesses in the UK has found that the majority of business owners affected by late payment are suffering stress, anxiety or depression because they are so worried about cashflow.
A survey conducted by the digital payment platform Juno has found that the late payment crisis is affecting the mental health of small business owners, with 63% saying they are suffering from stress, anxiety and/or depression as a result of cashflow issues caused by late payments.
The findings show that a shocking 91% of communications businesses (sales, media, marketing, PR and advertising) are paid late compared to 68% of all UK businesses. This is 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%).
As many as 50,000 businesses close every year due to late payments, and the pandemic is thought to have exacerbated the issue, according to the Federation of Small Businesses (FSB).
The survey findings published in Juno's report, The real cost of late payments in the UK, suggest that the impact is felt the most by younger business owners with over 78% of those aged 21-30 years saying that cashflow was having a negative impact on their mental health. Mental health issues in the media, marketing and advertising sector are especially worrying, with 67% of respondents saying they were stressed by late payment. In fact, 28% of those in this sector said they were at risk of bankruptcy or business closure (compared to 18% of all 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.
Other key findings show that:
- 78% of London businesses are paid late;
- 55% of sole traders are not paid on time;
- 62% of businesses say they chase their clients "extensively" for payment, taking their focus away from clients and projects.
Liz Barclay, the UK government small business commissioner, said: "Unfair supplier payment terms mask the full extent of how late payment impacts businesses. It affects their cashflow 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."
Written by Rachel Miller.
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