Benjamin Franklin once said there are just two things certain in life: death and taxes. Depressing? Completely. Well here’s another one for you to digest: late payments - the offence that cost UK small businesses £26bn last year, and capsized thousands of freelancers and startups in the process.
If you haven't already as a business owner, you'll more than likely have to face up to the inevitability of being paid late, and often. On average, UK small businesses are paid 21 days late, while new stats from FreeAgent reveal that just 51% of invoices sent by UK micro-businesses last year were paid on time.
Running tighter ships with less cash readily available, freelancers and small businesses suffer most when it comes to not being paid on time, as FreeAgent CEO Ed Molyneux states:
“Micro-business owners need to get paid promptly to keep their cash flow healthy and most don’t have the luxury of being able to absorb a late - or non - payment in their accounts.”
Earlier in the year the self-proclaimed Party for small business – The Conservatives – appointed a Small Business Commissioner whose responsibilities include tackling the late payment that's plaguing micro-businesses.
Ensuring freelancers, contractors and small businesses get paid the money they're owed is just one half of the battle though. The trick is to name and shame the worst offenders, preventing it from happening time and time again, explained IPSE CEO Chris Bryce:
“The Commissioner has been given the power to ‘name and shame’ companies which persistently pay late. It’s essential he or she uses this power to drive real culture change among these companies, so the self-employed can get on with work without the worry of late, or non-payment hanging over their heads.”
The stats speak for themselves, and what’s more late payment is very much a UK wide epidemic, with Sheffield claiming first place as the worst area for late payment, closely followed by Twickenham in London.
Worst areas for late payment:
- Sheffield, with 24% of invoices paid on time
- Twickenham, with 27% of invoices paid on time
- Slough, with 29% of invoices paid on time
- Leeds, with 39% of invoices paid on time
- Stevenage, with 39% of invoices paid on time
Least affected areas for late payment:
- Manchester, with just 75% of invoices paid on time
- Aberdeen with just 61% of invoices paid on time
- York, with just 61% of invoices paid on time
- Leicester, with just 58% of invoices paid on time
- Norwich, with just 58% of invoices paid on time
Many freelancers shorten payment terms, invoice immediately and even discounts to get paid on time. But ultimately, these tricks aren’t always successful, and the problem continues. As we head into 2017, there is one certainty – the scourge of late payment will be high on the agenda of lobbying bodies and Government Business departments as the size and influence of the freelance workforce continues to grow.
How badly have you been affected by late payment? Join the conversation...