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The Unbelievable Impact that Late Payments have on Productivity

Posted on 23rd September 2021 at 16:28

So many businesses struggle or even go under due to cash flow issues. What’s more, is that, said issues with cash flow, are often due as a direct result of late payments.

Late payments might not seem like such a big deal, but when you have enough of them, this can impact so much more than cash flow. It can negatively impact your ability to pay your staff, it can threaten the future of your business, and it can extend beyond your work and cause financial stress in your private life too.

Unpaid invoices cause so much havoc that you may not be aware of. To help you mitigate the damage, here is the impact that late payments can have on your business’s productivity.

Unpaid invoices is a harrowing part of owning a business, which keeps many of us up at night feeling anxious. Here are some of the impacts and consequences of leaving invoices unpaid and why it is imperative to chase for payments.

Crippling Cash Flow

The main impact of late payments is obviously on cash flow. Without consistent cash flow, SMEs are unable to pay their staff, their expenses or their suppliers. As you can imagine, this puts a massive amount of strain on every area of the business.

Without consistent cash flow, SMEs are unable to pay their staff, their expenses or their suppliers.

As you can imagine, this puts a massive amount of strain on every area of the business.

High Stress

75% of UK business owners report not being able to sleep due to unpaid invoices and 22% start chasing as soon as they wake up. While the personal impact may not seem like such a problem, this does extend to the business. Business owners who are spending 56% of their time outside of the working day, chasing unpaid invoices…they are going to be far less productive during working hours.

75% of UK business owners report not being able to sleep due to unpaid invoices and 22% start chasing as soon as they wake up - Don't become one of these business owners - Penney's can help - Constantly chase for payments

Wasted Time

The average UK SME is wasting 30% of their time chasing approximately 5 outstanding invoices at any given point. This means that the true cost of late payments isn’t just ‘monies owed,’ it’s monies owed plus costs incurred while chasing payments.

Interest Charges

With inconsistent cash flows, many small business owners have to result to finance to cover their costs. If they don’t, they may not be able to pay their bills or their staff. As with any loan, financing comes with interest, and interest charges can be expensive. Imagine how much money you’re losing on a per-job basis just because of late payments.

Increased Staffing Costs

Studies have shown that businesses in London spend 1.5 full days on average per month just chasing late invoices. It’s no surprise then that many choose to hire new staff simply to spend this time chasing the money they have already earned.

It’s no surprise then that many choose to hire new staff simply to spend this time chasing the money they have already earned.

Business Stagnation

Rather than resort to financing and suffer the high-interest charges, many businesses opt to use funds that they’ve put aside for growing the business. A recent study showed that 30% of small businesses opted to do this.

While it may seem like a better option to take over financing, this can lead to reduced growth opportunities. And without growth or adaptation, businesses stagnate.

If you're too busy chasing for payments that's time wasted unable to focus on business development and continuing to grow your business - growth will cease and business will stagnate

Focus on how you can Minimise the Impact of Late Payments on your Business

Hopefully, now you can see the true cost and devastation that late payments can have on your business. It’s scary, isn’t it? Don't fall into the pitfall trap...set up precautions to avoid the potential threat happening to you. To mitigate this impact:

Invest in practice management software and automate your invoicing process as much as possible.

Offer your clients as many payment options as possible.

Outsource your invoicing and credit control to a financial professional.

If you do these, you can almost eliminate the impact of late payments on your business and start growing with confidence...

Focus on how you can Minimise the Impact of Late Payments on your Business - Don't become stressed over payments - protect yourself and set up a barricade - advice from accountants in Farnborough

You have now seen the devastating impacts on what late payments can cause you - don't fall into the pitfall trap...set up precautious to mitigate the potential threat

Don't be swept away by the pressure of unknowing if you're going to be paid - set up methods to mitigate and avoid this happening to you - advice from accountants in Farnborough - Penney's Accountancy is here to help,

Sources

AMC - Accountant's Millionaire's Club

Accountex - Accounting Insight - https://www.accountex.co.uk/insight/2019/11/15/chasing-late-payment/

CityA.M. - https://www.cityam.com/uk-smes-chasing-50bn-in-late-payments/

Basware - https://www.basware.com/en-en/blog/june-2018/the-effect-of-late-payments-on-productivity-and-th/

Published by Callum Williams - Business Administrator and Marketer

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