Small businesses continue to battle with late-paying clients

Late payments is still a chronic disease for UK micro-businesses

UK freelancers and micro-business owners are still being plagued by late paying clients, according to new research by cloud accounting software company FreeAgent.  
The Edinburgh firm, which provides award-winning software for freelancers, micro-businesses and their accountants, has unveiled data showing the extent of the problem of late payment in the UK and which areas are worst affected by it. The findings revealed that only half of all invoices (51%) sent in UK last year were paid on time.
Ed Molyneux, CEO and co-founder of FreeAgent
FreeAgent reviewed data from a sample of its 50,000+ customer-base and analysed hundreds of thousands of invoices that were sent in the last year to create a late payment overview of the UK.
The research also found that Sheffield is the area worst affected by late payment – with just 29% of invoices sent during the 2016 calendar year were paid within three days of their payment deadline – closely followed by Twickenham (37%) and Peterborough (37%). In contrast, Manchester is least affected by late payment, with 79% of invoices sent by micro-businesses in the city in 2016 paid on time.
Worst areas for late payment

City

Percentage of invoices paid on time

Sheffield

29%

Peterborough

37%

Twickenham

37%

Northampton

38%

Belfast

42%

Least affected areas for late payment

City

Percentage of invoices paid on time

Manchester

79%

Leeds

76%

St Albans

67%

Coventry

61%

Nottingham

60%

In 2016, a total of 3.15 million invoices worth more than £4.5 billion were sent by FreeAgent customers.
The issue of late payment has become so prevalent that the UK government announced last year that a special small business commissioner will be appointed to specifically deal with the problem. However, the position has still yet to be filled and fears have been raised over how effective the commissioner will actually be when it comes to tackling late payment.
Ed Molyneux, CEO and co-founder of FreeAgent, said: “Late payments are still a huge issue for the UK economy, but our research shows just how widespread it is for the freelance and micro-business community.
“We found that just over half of the invoices sent by micro-businesses in the UK get paid late, and there are certain hotspots where the issue is considerably even worse. Even in Manchester, where late payment is least prevalent, there are still many businesses who aren’t being paid on time. And we’re not just talking about clients taking an extra week or two to pay – this includes chronic late payers who sit on invoices for months, as well as those who just don’t pay at all.
It’s certainly good news that the government recognises the late payment problem and is recruiting a small business commissioner to tackle the issue. However this process has dragged on for a considerable amount of time and I fear that whoever is appointed will have limited power to actually punish companies who routinely pay late, aside from just naming and shaming them.
“Micro-business owners need to get paid promptly to keep their cash flow healthy and most don’t have the luxury of being able to absorb a late – or non-payment in their accounts. We need to see a complete cultural shift when it comes to paying invoices, so that these types of smaller businesses are not put at risk.”
Full list of UK areas by % of invoices paid on time in 2016
Sheffield – 29%
Peterborough – 37%
Twickenham – 37%
Northampton – 38%
Belfast – 42%
Tonbridge – 42%
Cardiff – 43%
Rochester – 43%
Stevenage – 43%
Chester – 44%
Glasgow – 44%
Gloucester – 44%
Hemel Hempstead – 44%
London NW – 44%
Newcastle upon Tyne – 44%
Slough – 44%
Croydon – 46%
Harrow – 46%
Milton Keynes – 46%
Southampton – 46%
Bath – 48%
Kingston upon Thames – 48%
London E – 48%
Warrington – 48%
London WC – 49%
Redhill – 49%
London EC – 50%
UK AVERAGE – 51%
Chelmsford – 51%
London SE – 51%
London W – 51%
Birmingham – 52%
Edinburgh – 52%
Swindon – 52%
Aberdeen – 53%
Brighton – 53%
Bristol – 53%
Guildford – 53%
Oxford – 53%
Portsmout – 53%
Reading – 53%
Stockport – 53%
Exeter – 54%
York – 54%
Cambridge – 55%
Ipswich – 55%
Bournemouth – 56%
London N – 56%
London SW – 56%
Leicester – 57%
Derby – 58%
Norwich – 59%
Watford – 59%
Nottingham – 60%
Coventry – 61%
St Albans – 67%
Leeds – 76%
Manchester – 79%
* “On time” invoices were comprised of all invoices paid within 3 days (or earlier) of the payment deadline set by their senders. FreeAgent analysed data from more than 790,000 invoices sent by 8200+ micro-business customers – ie, businesses with 0-9 employees – from January 1st 2016 to December 31st 2016
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