Big Rise in Businesses Taking Legal Action on Late Payments
Two in five small business owners (40%) say they are taking legal action against customers not paying them on time and many bosses are foregoing their own salary in order to ensure their employees get paid on time.
According to new research from Hitachi Capital Business Finance, one in five business owners (20%) are even not pay themselves because of unpaid invoices are affecting their cash flow. This number doubles for smaller ventures with less than 10 employees (40%).
At a time when Hitachi Capital Business Finance has found that three in five small businesses are affected by late payments (62%), the new data highlights the very human impact on business owners – and these issues have seen a marked increase since 2018. For example, there has been a 22% rise in the number of small businesses wasting time and money on and legal action to chase a late payment (rising from 31% to 40% since 2018), and a 14% increase in SME’s being unable to pay suppliers because of late customer payments (up from 31% to 36%).
The cashflow challenges that result from chasing late payment has forced more than one in three small businesses (35%) to seek short term-borrowing in order to make ends meet.
Gavin Wraith-Carter, Managing Director at Hitachi Capital Business Finance commented: “It is disheartening that so many small business owners feel impeded because their customers are not paying on time and, for many, the wreaks havoc with their cashflow. The fact many small business owners are sacrificing their own salary also means they are literally taking their business worries home with them.”
“At Hitachi Capital Business Finance we are working hard to develop a range of flexible products that are designed to support small businesses through highs and lows so they can budget and plan with more confidence – and not let seasonal or unexpected surprises derail their business plans.”