More than a quarter of small business owners struggle with depression, anxiety, stress or other issues caused by the worry of late payments, according to a report.
Research by The Prompt Payment Directory found that 29 per cent of SME owners in the UK are affected by issues like these because of clients who miss payment dates.
Its research found that 18 per cent of small businesses are on the brink of bankruptcy or liquidation because of late payments, with 42 per cent having been forced to take out a business bank loan to cover an outstanding payment.
Meanwhile, 29 per cent have struggled to pay business rates and another 21 per cent have had difficulties paying the company mortgage or rent.
There is also a knock-on effect for staff, with 36 per cent of business having paid their staff late, 10 per cent cutting back on staff perks and events and 29 per cent reporting that their staff morale, recruitment and retention have been affected as a result.
But the report showed that late payments also have an effect beyond the workplace.
34 per cent of SME owners said they regularly lose sleep because of the problems the issue causes and seven per cent even claimed they have lost their hair because of the anxiety.
As a result of poor payment practices, 36 per cent of small business owners say they have had to sacrifice their own salaries, while 21 per cent struggle to pay their mortgage or rent or have had to sell their homes and 17 per cent have had to remortgage their homes.
Meanwhile, seven per cent have been forced to take out payday loans.
“The financial implications of late payments have been well reported over the years but our research delves deeper into the repercussions of poor cashflow to reveal how it affects and even destroys people’s health and lives,” said Hugh Gage, managing director at The Prompt Payment Directory, commenting on the findings.
“The government’s Duty to Report is a welcome step in tackling late payments but it has its limitations. Only large companies are required to report and only twice a year, but late payment isn’t simply an issue between small suppliers and large customers.
“Also, the Duty to Report requires debtors to report on their own payment practices which is counter intuitive, plus an absence of context behind the reasons for the late payment makes it harder for small businesses to reach decisions before entering contractual relationships.”
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