Stress & anxiety: The ugly truth about the impact of late payment
The impact late payment has on a small business’s cash flow is well documented – but often the negative effects spread much further than company finances.
As a debt collection agency, we speak to clients every day who have been negatively affected by late payment – both professionally and personally.
Here are some of the most common ways business owners and their staff are impacted when customers don’t pay on time.
Personal finance troubles
When customers fail to pay, business leaders are often left with no choice but to make up the shortfall from their own pocket, have to reduce their own salary or do not take any pay at all.
Particularly in the smallest of businesses, getting paid late not only stops the business from being able to meet its commitments, it could prevent the business owner from meeting personal commitments too.
According to new research from tomato pay, as a result of late payment, 33% of small business owners are being forced to pay themselves late, or not at all.
It’s not just business owners whose wages can be delayed as a result of late payment.
According to the same research, 17% of small businesses have had to pay employees late when their customers pay late.
Employees may then miss mortgage or rent payments as a result, as well as other vital overheads such as utilities and loan repayments.
This can severely impact employee morale, cause conflict at work and even cause staff to look for alternate employment.
Stress and anxiety
The late payment of invoices is also causing owners and directors of SMEs stress-related problems, according to a survey by Juno.
The research showed that late payment can have a detrimental impact on personal health, with many business owners suffering from anxiety and depression as a result of the cash flow pressures brought to bear on their businesses through late payments.
With the negative impacts of late payment spilling over into personal finances and health, it’s not surprising that sometimes this can have a knock-on effect on relationships outside of the workplace too.
When under intense pressure from late payment, some business owners find themselves struggling to socialise and maintain personal relationships.
This then contributes to the stress and anxiety mentioned above, creating a vicious cycle that can be difficult to navigate away from.
So it’s clear to see that, when hit by late payment, the negative impacts are far-reaching. Yet many businesses continue to pay late and contribute to the problem.
What’s the solution?
In recent years the government has put the onus on getting larger businesses to improve their payment practices, with initiatives such as strengthening the Prompt Payment Code, introducing tougher payment reporting and hiring a Small Business Commissioner.
However, even with these initiatives, late payment is still rife and only likely to increase over the coming months as the cash pressure grows on businesses following the withdrawal of the various pandemic-related government support.
This therefore puts the onus on small businesses to take appropriate action themselves to reduce the impact and likelihood of late payment. This starts with credit control.
Creating an efficient and effective credit management procedure is key to making sure your money is coming in on time and limiting the impact it has on your cash flow when it doesn’t.
Our credit control tips section offers lots of helpful ways your business can improve its procedures, and links to useful articles that go into further detail. We hope you find it useful.
Can you relate to any of the issues mentioned above? Please share your experiences in the comments below. Or, if your business is still struggling with late payment, contact us today on 0800 9774848 or request a call back to see what we could do to help your business.