Small firms are owed £12,000 a year in late payments as arrears reach £70bn, report finds

Small businesses in the UK are owed an average of more than £12,000 annually in late payments, with outstanding invoices potentially totalling £70.4bn nationwide, according to research by Hiscox.

The findings, based on a survey of 1,000 small business owners and sole traders conducted by Censuswide, form part of the company’s inaugural Late Payments Report examining the scale and impact of delayed payments.

Hiscox estimated that with 5.7 million small businesses operating in the UK, late payments represent a significant cash flow challenge across the sector.

Almost a quarter (23%) of payments to small firms arrive late, with delays increasing alongside business size – from 19% of payments to sole traders to 25% for firms employing 10 to 49 staff.

On average, businesses wait around three weeks beyond the due date to receive overdue payments and pursue approximately 14 late invoices each year.

This equates to a cumulative 331 days spent waiting for payment across all outstanding invoices annually.

For 17% of businesses, payment can take more than a month after the due date, and in some cases invoices remain unpaid.

An anonymous business owner told researchers: “There’s always the fear that someone won’t pay up. I’ve had it only twice in nine years where an invoice hasn’t been paid at all.

“The first time it happened, they were my only client, and it meant I had no money for two months.

“Working for yourself is a joy. It’s the best. But when people don’t pay up, it not only throws your finances into issues, but it also affects your confidence and piles on stress. It means you always need money set aside for worst-case scenarios.”

The IT and telecoms sector reported the highest average number of late payments chased, followed by finance, healthcare, retail and legal services.

The report comes as the government’s Fair Payment Code, introduced last year to address late payment practices, continues to be rolled out.

Nick Thornhill, direct and partnerships director at Hiscox, said: “Late payments might be a recurring character in the small business world, but they don’t have to be a thorn in your side.

“With some clear rules, you can keep your cash flowing and your focus where it belongs – growing your business.”