With implications for the merchant sector and the wider building materials supply chain, new research from Direct Line business insurance reveals that 81% of tradespeople are owed money and are currently chasing late payments from customers averaging over £6,000 (£6,210).
Half say they have seen a rise in the number of customers disputing invoices, and a further 42% say they are chasing more late payments now than they were last year. Furthermore, almost three quarters (73%) are chasing multiple overdue payments, fighting to secure an average of seven late payments.
Almost a third of those owed money are currently chasing outstanding invoices worth £2,500 or more, with nearly one in ten owed more than £25,000 and 15% currently chasing ten or more payments.
Over four fifths (84%) of those surveyed had pursued outstanding payments through a small claims court, with just under half (48%) being successful. On average, the largest single invoice tradespeople have given up chasing comes to £4,390, with almost a quarter (22%) losing out on payments worth over £2,500. Nearly one in ten (8%) have given up a payment of over £10,000, with just over a fifth writing off an invoice of £25,000 or more, significantly impacting finances and the ability to run their business.
In addition, over a fifth (22%) worry that pursuing late payments takes time away from work. One in five say that late payments leave them unable to cover their family and personal expenses, while 18% say it causes difficulties running their business. A further 13% worry about the cost of getting legal advice if their clients don’t pay on time.
To counter this, 36% take half of the payment up front, 21% send invoices well in advance and chase for the payment nearer the due date, while 19% charge a ‘late payment fee’ to discourage clients from paying late. Another 19% offer discounts for paying quickly.
Alison Traboulsi, Product Manager at Direct Line business insurance, commented: “Late payments can quickly become a big problem for small and independent businesses, leaving them unable to cover personal and business expenses, resulting in cash flow problems, stress and legal headaches. Pursuing late payments is time consuming and eats into the time that could be spent working or with family and friends.
“Research from the Office of the Small Business Commissioner shows that late payments cost small business owners £2.5 billion each year, and we know it is a major issue for tradespeople. It’s concerning to see the value of invoices tradespeople have had to write off and that many are seeing a rise in the number of customers disputing invoices and the number of payments they need to chase.”
Direct Line notes that its business insurance policies come with Legal Essentials, a service that provides tradespeople with unlimited access to a team of DAS legal experts for confidential legal advice and access to a library of legal templates, tools, and guides to help them run their business, including guidance on how to pursue late payments.
