in Business

Give S(ME) some certainty – late payments force more than half of small businesses to use emergency finance

Late payments are an ongoing battle for SMB owners, but they’re not just a business pain. New GoCardless research has revealed the real human impact of cash flow uncertainty on small business bosses.

Our study of 250 small business owners found that:

  • 56% of UK business owners have had to use personal or emergency finance to pay for business expenses due to late payments.
  • 80% of respondents couldn’t be sure they’ll be able to pay their bills on time due to unpaid invoices negatively impacting cash flow.
  • 89% of business owners say uncertainty around when payments will come in makes them more stressed and anxious.

Findings also showed that 41% of SMB owners are more concerned with late-payments having a negative effect on their business than Brexit.

GoCardless’ CEO, Hiroki, says:

“It’s unacceptable for small business owners to have so much uncertainty around their payments. When late-payments are resulting in founders taking emergency finance or not being able to pay their bills on time, it’s time to do things differently. Currently, only 43% of SMB owners are using tech solutions to ensure they’re paid on time.

According to the Federation of Small Businesses’ report, £6,142 is the average value of late payments, and on-time payments would generate £2.5 billion for the UK economy. The same report shows a boost in finances from on-time payments would have saved 50,000 UK businesses from failing.

Our research also reveals that:

  • 91% of SMB owners confirm having certainty on payments is an essential component to their business.
  • More than 80% of small business owners say that uncertainty means that they can’t grow their businesses in the way that they want, and that certainty would allow them to grow their business faster.
  • 67% have to make sacrifices such as salary, holiday or hiring due to late payment.

Hiroki adds: “Direct Debit is a great way for businesses to tackle late payment culture by guaranteeing more certainty around when they get paid. Business owners should be able to focus on running and expanding their business, not spending days chasing unpaid invoices.”

Peter Czapp, Founder of The Wow Company, an accounting firm that advises SMBs, says: "If you can get 75% - 80% of customers paying by Direct Debit – you can just sleep better at night. This tactic helps small businesses to pay staff on time and invest in the business."

GoCardless customer and Founder of Has Bean Coffee, Steve Leighton, was working at an all-night petrol station before following his passion for coffee and opening an independent coffee wholesaler. Speaking on his first-hand experience of delayed payments hindering his operations, Steve adds: “Customers paying invoices up to four months late drove us crazy. Now we can automatically take payment when issuing invoices.”

We've got lots of resources to help businesses get paid on time. Our guides for accountants and agencies guide you through practical, low-cost, high-impact tactics that will reduce your average payment times and debtor days.

A practical blueprint for fast payment
View the guide