Are late payments holding back your business?

Late payments have long been a huge issue for small businesses, as many simply don’t have the financial means to go without money they’re owed for any great stretch of time.

As a result, the very survival of some businesses is at stake, with the Federation of Small Businesses (FSB) stating that late payments are behind the closure of 50,000 businesses every year.

What’s more, according to a recent FSB survey, the situation is deteriorating, as nearly one in three small businesses believe their payment situation has worsened over the last three months.

The FSB is therefore calling for action to be taken to tackle late payment “once and for all”.

In particular, the body wants audit committees of large corporates to be made “responsible and accountable for supply chain payment practices”. This, it says, should be underpinned with a legal requirement for payment times and conditions to be published in annual reports.

The issue of late payments and the threat this poses is contributing to the drop in confidence among small businesses, which is now at its lowest level since the final quarter of 2020.

Government urged to act

The FSB has urged Chancellor of the Exchequer Jeremy Hunt to address this issue in his upcoming Budget and tackle what it calls a “late payment culture”.

It certainly appears as if some in government recognise this problem and want action to be taken.

For example, Small Business Minister Kevin Hollinrake recently noted that access to finance is difficult for “too many businesses”.

“Lots of businesses don’t want to borrow because of a trust relationship between business and banks at times,” he said.

“Late payments are seen as a finance problem. It creates a need with a business to go out and get finance, just to cover the debt.”

So while there has been acknowledgement of the impact of late payments on small businesses within the corridors of power, it remains to be seen what measures will be put in place to address it effectively.

The human cost of late payments

Late payments don’t just harm a small business – they have a terrible impact on the people who run those firms as well.

For example, a survey by debt collection agencies Federal Management and Frontline Collections revealed that two-thirds of SME owners have had to use their personal funds to supplement their firm’s cash flow.

Some of those polled admitted they’ve had to cash in pension policies to keep their business afloat, while others have had to remortgage their home.

Perhaps unsurprisingly, many are therefore fearful about the prospects of their small business, with almost half saying they’re not sure if it will still be trading in a year’s time.

The financial pressure and uncertainty is in turn having a detrimental effect on people’s mental health.

Nearly eight in ten small business owners said late payments to their firm had caused their mental health to suffer, and many of those who run the smallest businesses revealed they’re in a constant state of worry about not being paid at all.

Small businesses are often referred to as the backbone of the UK economy, so it’s incumbent on all of us who transact, work and engage with these firms to help them continue driving growth and delivering essential goods and services.

As the UK looks to avoid or at least minimise the impact of a possible recession, helping even our smallest businesses survive and thrive is vitally important.

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The guidance and/or advice contained within this website is subject to the UK regulatory regime and is therefore primarily targeted at consumers based in the UK. Welby is a trading name of Welby Associates Wealth Management Ltd Company Registered Number NI630504 who is authorised and regulated by the Financial Conduct Authority, FCA register number 697372. The Financial Ombudsman Service is available to sort out individual complaints that clients and financial services businesses aren't able to resolve themselves. To contact the Financial Ombudsman Service please visit

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