Late and non-payment is unfortunately very common for small businesses. More than 75% of British small businesses are waiting for overdue invoices to be paid, and they’re owed £24,841 each on average.
If you’re in a similar position, this is what persistent late and non-payment could do to your business.
When invoice payments don’t come into your business as expected, but expenses continue to come out, accounts start running low. This can have all kinds of negative knock-on effects, such as making it harder to pay important bills, cover staff expenses, and invest in your products and services.
Research by the Federation of Small Businesses has revealed that cash flow problems can get really serious - 50,000 businesses close because of late payments every year. This obviously has a major impact on the British economy too, costing up to £2.5 billion in bad debt that will never be paid.
Your main outgoings are likely to be staff, rent or mortgage payments, utilities, and suppliers. These payments are essential, so business owners with outstanding invoices will often try to reshuffle cash and resources around to cover them.
According to Bacs, “a quarter of small business owners...have been forced to pay their own suppliers late”, and 28% have reduced their own salaries to cover costs.
If the average business is owed just under £25k, according to Xero’s Small Business insights, this can equate to “11 months’ average staff wages or 37 months of mortgage payments.”
Negative cash flow is not a secure position for a business owner to be in. You have less cash to spend on the things that matter, and growth is a steeper climb than usual.
Business owners find their confidence in different ways. Some value stability and certainty, others can walk into any meeting or pitch as long as they’re prepared. Finances have a big impact on all your business decisions, and uncertain or insufficient cash flow creates shaky foundations.
If you can improve the chances of getting invoices paid on time and recover non-payment easily, your cash flow has a much better chance of staying healthy.
Monitor and track all invoices your business sends - automated accounting software is great for this. You’ll know when invoices are due, which clients are persistent late payers, and when to chase. No one will fall through the cracks.
With Hokodo’s Invoice Insurance, your business will get up to 90% of the value of every unpaid invoice. Our policies are backed by Lloyd’s of London, the world’s specialist insurance market, so you can keep growing with confidence.