Why late payments are a mental health issue (and what to do about it) - Asking for your input.

To wrap up this series, we're supporting the Small Business Commissioner in their work to improve laws around poor payment behaviours from businesses to freelancers. Have your say.

In the first part of this short series, we looked at why late payments to freelancers are a mental health issue, specifically with regards to a major problem: Cashflow.

In the second part, we spoke about confidence and capacity.

In the third part, we looked at how to avoid late payments in the first place.

In the last part, we gave some practical advice on what to do when it happens.

But, the current laws don’t go far enough…

Hopefully you’re clearer now on your rights as a small business owner, and recognise that whilst prevention is better than cure, and avoiding late payments takes some effort on our side - they’re still likely to happen.

It’s a huge problem in the UK, 38 small businesses close EVERY DAY due to poor late payment related issues. It’s an £11bn/year sized problem, and the government is putting new powers in place to tackle the issue.

The Small Business Commissioner, the team within government focused on getting small businesses paid faster, have a consultation on implementing new rules and laws to try and improve things.

Their proposals are to:

+ Reduce maximum payment terms to 60 days (and eventually 45), getting rid of those horrific 90, 120, 180 day contracts (yes, they still exist).

+ Enforce a 30 day “dispute resolution” window so clients can’t turn around when you invoice is already late, and start claiming it’s not valid

+ Make interest on late payments mandatory, rather than an optional lever we can push - aiming to put the burden of responsibility to the payer, not you.

+ Compel businesses to report on their payment stats to small businesses, and fine persistent late payers

+ Additional powers to investigate businesses who have poor practices.

+ Plus a handful of other things which I’ve go into over here.

But, are these the right things to do? Might they have unintended consequences? Might it leads to hirers avoiding working with freelancers if they have to pay interest, or reduce our project budgets if they’ll end up sucking up the cost? Might it add additional burden or conflict with our clients if they’re paying late and being forced to pay interest? Does it remove the lever which we can use to encourage payment?

Generally, I’m overwhelmingly supportive of these recommendations - but this is your opportunity to speak directly to the people designing the new laws and policies. It’s rare we get the opportunity to input at this stage, so give your input here:

» Share your views on the late payments proposals

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That’s all from me this week.
✌️ mk