Welcoming the changes to rules around late payments - and why it matters.
Changes to the law are coming to better support small businesses facing late payments - and it couldn't come soon enough.
Just under a year ago, I wrote a LONG series of posts here about why late payments are a mental health issue. You can read them here, but I’ll summarise.
Financial anxiety is one of the biggest causes of stress in the UK, and when you’re a small business owner, as we freelancers are, we are incredibly close to every pound and penny which comes into and leaves our business.
And when that money doesn’t come in, it has a number of knock-on effects.
If you’ve not got the money in your account, but bills are still stacking up - you’ll naturally feel anxious about the risk of going into debt.
If you have chase your client to ask for the money you’re owed, not only can it feel awkward, but you might be concerned it is putting your future relationship with the client at risk, or that you might be seen as being ‘difficult’.
The additional burden of time, chasing and following up eats into your ability to be doing work - impacting your other clients, or your evenings and weekends.
If you have to escalate, or even undertake a legal process to get the money, it can be incredibly stressful.
It can prompt thoughts like “Maybe the work wasn’t good enough”, which starts to eat away at our confidence.
It’s unfair that disrespectful clients put us through one or more of these feelings, all of which can impact our overall mental health - and have further knock-on effects, like poorer sleep, which makes it harder to cope the next day.
And unfortunately, it’s not just an emotional impact.
Over 1.5 million businesses are affected by late payments each year.
Businesses are owed an estimated £26 billion in late payments at any given time, on average £17,000 per business affected by late payment.
UK Businesses said they spend on average 86 hours dealing with late payments every year.
14,000 businesses close each year as a result of late payments, equivalent to 38 businesses every day.
That’s not okay.
So, we welcome recently announced changes to how late payments are being tackled in the UK, including:
more powers to the office of the small business commissioner to investigate poor payment practices - so if you’ve a large client who is consistently paying you slowly, you can ask them to get involved
maximum payment terms of 60 days, and eventually 30 - to reduce long payment terms, which help speed up cash flow
mandatory late payment interest - it will no longer be optional, if a client pays late, they will owe you interest on the invoice
Whilst the law hasn’t changed yet, they’ll be introduced as soon as possible, so we’ll keep you posted on when your rights improve.
In the meantime, our Late Payments guide has some pragmatic tips on what to do when you’re facing a late payment, and things to put in place to avoid them happening.
If you are facing issues around debt, help is available.
Business Debtline provides free debt advice to small businesses and people who are self-employed. You can access their services over the phone, through their website and via chat.
0800 197 6026
The Business Debtline contact centre is open Monday – Friday from 9am until 8pm.
That’s all from today
✌️mk