Late payments have been a problem in the UK for a long time, and the pandemic has only made it worse. This situation has left businesses and the people running them struggling. We recently ran an exclusive survey to learn how late payments impact mental health in business owners. We found out that amidst the late payments epidemic currently affecting the business ecosystem, founders are also paying a personal high price.
A personal matter
For many founders late payments are very personal. A cybersecurity specialist and founder told us:
“Getting paid on time means feeding the kids. It’s a very tight coupling sometimes between a client paying on time and being able to live.”SME founder
This founder is not alone. Late payments impact the mental health of 63% of business owners in the UK, our survey revealed. They reported struggling with anxiety, depression, and/or stress as a direct result of late payments during the pandemic. A further 11% said they were thinking of making redundancies or had already made them during this period, and 18% felt at risk of bankruptcy or business closure – both of which put further strain on their mental health.
The mental health impact of late payments is highest amongst Scottish founders, with 81% struggling. Interestingly, businesses in Scotland are also the least hit by late payments when compared to other UK regions, at 58%. Conversely, London sees the highest rate of late payments at 78%, but one of the lowest rates of related mental health issues at 55%.
Some sectors struggle more with mental health than others. Late payments put high pressure on manufacturing (83%) and retail (75%), sectors that rely on being able to buy and sell supplies and products on time. Naturally, delays affect supply chains and result in founders and employees having to double down in their efforts to get paid and meet tight deadlines.
In the legal sector, 83% of founders are struggling. Small legal firms live and die on their cash flow and business relationships. Long deals mean that law firms often work with clients for a while before getting paid. When they do get paid, it helps their cash flow greatly, but when they don’t, things can go the other way rapidly. What’s more, relationships are often irreparable after a firm has to initiate debt recovery proceedings against their clients.
We must work together to fix late payments
We must all contribute to eradicating late payments. The first step to do is to acknowledge the mental health impact of late payments and spread awareness of the issue. The next thing is to start negotiating payment terms that work for all parties and that are going to be adhered to. Signing up to the newly revamped Prompt Payment Code and encouraging other businesses is also a sure way of helping businesses in the long term.
“You don’t have an awful lot of negotiating power with clients, in a lot of ways you rest on the benevolence of their finance areas to pay you on time.”SME founder
If you’re struggling with your mental health, have a look at these resources.