Home Business NewsBusiness Half of SME business owners on a knife edge due to late payments

Half of SME business owners on a knife edge due to late payments

8th May 18 3:30 pm

New research reveals the extent to which business owners are suffering

The number of SME business owners struggling financially and suffering from mental health issues as a result, has risen dramatically since last year, new research commissioned by The Prompt Payment Directory has found.

Half of SME owners’ businesses – 23% more than last year – have been on the brink of bankruptcy or liquidation, or could be soon due to late payments. 52%blame poor cashflow for their panic attacks, anxiety and depression, with some even having suicidal feelings and experiencing emotions of severe anger.

63% of owners said late payment issues had also meant that they had not paid themselves for some time, 42% had stopped or delayed bonuses, 20% had had to pay staff late and 17% had reduced their own salary.

If customers continue to pay late, 53% of owners said it will soon affect the progress and growth of their business, while 42% said it had already impacted staff morale, recruitment and retention, 35% had struggled to pay business rates and 31% had struggled to pay mortgage or rental payments on their office.

The survey polled 1,000 UK small to mid-sized company owners who suffer from poor cashflow due to late or outstanding invoice payments. The research examined the personal, financial and business impact of late payments on owners and found the issue had worsened since PPD’s first study was launched last spring.

14% of SME owners had put on hold plans to grow their family and 19% can no longer afford to pay for school trips, clubs or tuition fees for their children.

25% had cut back on their social activity like going to the cinema, eating out or drinks with friends, 19% had cancelled their family holiday and 16% have sold or downgraded their car.

Key findings for 2018 compared to last year include:

The impact of late payment/and the knock-on effects to SME owner’s personal life 2018 2017
Is the business on the brink of bankruptcy or liquidation as a result of late payment, or will be soon if more payments are made late? 50% 28%
Not paid self for period of time 63% 36%
Caused loss of sleep 68% 34%
Caused depression, anxiety, increased stress of other mental health related illness 52% 29%
Put pressure on marriage/relationship with partner 22% 12%
Refused credit 40% 26%
Struggled to make house mortgage or rental payment 29% 14%
Sold and downsized the family home or had to move into rental property 16% 7%

Mental health issues

Out of the half of SME business owners now suffering from health related issues due to late payments, 44% suffer from stress, 40% struggle with insomnia, 19% experience depression and 17% experience anxiety and panic attacks. 14% admit to having ‘extreme anger’ whilst the remaining stated issues such as having suicidal feelings, self-harm, eating problems and paranoia.

Effects on staff 

Late payments have also had a strong knock-on effect on staff, PPD’s research has revealed. 

62% of owners had either paid their staff late, stopped or delayed bonuses, while 10% said they had had to stop or reduce staff perks such as company phones, cars or health insurance.

Unfair practices

59% of SME owners said they were victim to long payment terms beyond the Prompt Payment Code recommended terms of 60 days or 30 days for a Government payment. Nearly a third said they had been on the receiving end of mid contract terms to payment terms, 14% had been asked for retrospective discounting and 10% had been asked to ‘pay to stay’, or face supplier delisting.

Comments Hugh Gage, Managing Director of The Prompt Payment Directory: “Recent high profile cases such as Carillion have made many more people aware of the cost of late or non-payment and how it can affect small businesses, but in reality this has been going on for years. 

“Our latest research reveals that the impact of late payments has got even worse since last year and is having even deeper repercussions on businesses nationwide, it’s affecting and even destroying people’s business, health and lives.

“Business owners need to arm themselves against some of the most common late payment issues and fight back against these poor practices as it’s always best to try and avoid them from the outset by using due diligence through credit reference agencies, or services such as The Prompt Payment Directory which rates businesses’ payment behaviour by those that it affects – their suppliers.”

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