UK small businesses are collectively owed £70.4 billion, according to new research from Hiscox. The specialist insurer surveyed 1,000 small business owners and sole traders, revealing that businesses wait on an average of £12,357 in late payments per year, and that almost a quarter (23%) of all payments arrive late. To gather the data, the company surveyed 1,000 sole traders, small business owners and directors with knowledge of the business’ finances.
These figures appear just over one year since the UK government’s Fair Payment Code, introduced to tackle late payments. The code does appear to have been very successful.
The Fair Payment Code (FPC) is a voluntary UK initiative that encourages businesses to pay suppliers promptly and fairly, offering tiered awards for compliance.
Hiscox’s inaugural Late Payments report further highlights the cumulative impact of late payments. It was revealed that small businesses chase an average of 14 late payments annually, adding up to 331 days of waiting time across all invoices. For 17% of small businesses, payments take over a month, and some invoices are never received.
Certain sectors face the highest number of late payments:
| Sector | Late Payments |
| IT & Telecoms | 18 |
| Finance | 17 |
| Healthcare | 16 |
| Retail, Catering & Leisure | 15 |
| Legal | 14 |
Nick Thornhill, Direct and Partnerships Director at Hiscox, says in a supporting statement: “Late payments might be a recurring character in the small business world, but they don’t have to be a thorn in your side. With some clear rules, you can keep your cash flowing and your focus where it belongs – growing your business.”
Small businesses spend nearly a year waiting for late payments
On average, it takes three weeks from the due date for a late payment to be made,as presented in the report. With businesses chasing an average of 14 late payments annually, according to Hiscox’s research, that adds up to 331 days of cumulative waiting time across all invoices in a year.
For more than one in six small businesses (17%), it can take over a month after the due date to receive payment. And in some cases, the payment is never received.
A business owner, is quoted in the report stating: “There’s always the fear that someone won’t pay up. I’ve had it only twice in nine years where an invoice hasn’t been paid at all. The first time it happened, they were my only client, and it meant I had no money for two months.
“Working for yourself is a joy. It’s the best. But when people don’t pay up, it not only throws your finances into issues, but it also affects your confidence and piles on stress. It means you always need money set aside for worst-case scenarios.”
Almost a quarter of all payments arrive late
As to the extent of the problem, almost a quarter (23%) of all payments to small businesses are late, something that increases with business size.
On average, 19% of payments to sole traders are late; this increases to 25% of payments to businesses with 10-49 employees. Small businesses are chasing an average of 14 late payments.
The report recommends for businesses to be proactive, in terms of chasing up late payments. These practices include following up with a phone call (37%), building strong client relationships (36%) and being very clear with payment terms (36%).
