B2B Payments

Study Shows UK Late Payments’ Impact On Employees

Late payments have had a ripple effect in the UK, as cash flow has gotten tougher to manage – and even covering employees’ paychecks has become an issue.  QuickBooks has also found that self employed individuals struggle with cash flow problems even more often than do smaller firms.

The U.K.’s late payments problem has a ripple effect, hitting employees right in the pocketbook. To that end, QuickBooks has estimated that roughly one in seven firms are unable to pay staff due to cash flow issues — and have even had to turn down projects, losing about £26,000 (nearly $33,960 USD) on average.

The survey found that, as a result of late payments from clients and customers, these businesses have delayed wage payments — meaning 2.2 million workers in the U.K. may not have been paid on time. As reported by Smallbusiness.co.uk, QuickBooks’ findings showed that these smaller firms have an average of roughly £31,055 owed to them. The cash flow issues have also impacted their ability to pay debts, a fact cited by about a third of the companies surveyed.

Of the professionals surveyed by QuickBooks, self-employed workers are most heavily impacted by the aforementioned cash flow issues. In fact, said QuickBooks, self-employed individuals are 2.5 times more likely than small businesses — with up to 49 employees — to have cash flow issues “on multiple occasions,” and are as much as three times more likely than other segments of business to have applied for loans.

Drilling down a bit more, in the U.K., Begbies Traynor said that of the 1,000 firms it examined that entered insolvency last year, 34 percent were owed funds in excess of 57 days, and 15 percent for more than 86 days. Of the firms that were insolvent, 260 had been waiting for payment for an average of 25 days.

Separately, Tungsten said in Supply Chain Digital that when it analyzed more than 19 million transactions done globally across 100,000 businesses, it found that, “in the U.K., payments take an average of 42 days. Interestingly, it isn’t always willful neglect or deliberate cash flow management that leads companies to pay late.” The company’s research found that when looking into the causes of delays in the supply chain, “we discovered that, every week, businesses spend 55 hours doing manual, paper-based processes and checks; 39 hours chasing invoice exceptions, discrepancies and errors; and 23 hours responding to supplier enquiries.” The manual nature of the aforementioned tasks mean that “great strain” and delays have been hallmarks of the payments process.

As has been widely reported, the U.K. Chancellor of the Exchequer Philip Hammond has been seeking ways to crack down on late payments, and recent proposals include making larger firms appoint non-executive directors to devote efforts to combating late payments. In addition, these same firms must publish details about their payment practices. The Federation of Small Businesses (FSB) estimated that four of five smaller firms have been paid late, and were owed an average of more than £6,000. Furthermore, small businesses have claimed that larger companies have extended payment terms through the last two years.

Mike Cherry, the FSB’s national chairman said, “The commitment from the Chancellor that the Business Secretary will see this through is welcome, and we are especially pleased that the first measure has been announced. … The end of late payments could finally be in sight. It can’t come soon enough, to bolster small businesses at a time when they are in great need of support and a lift in confidence.”

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