Don’t let late payments give you sleepless nights

Blogs 14 Feb 2020

Ask any small business owner about what keeps them awake at night, and we're sure that cash flow features near the top of the list.

A person using a calculator with an alarm clock in the background

This content was last reviewed May 2020

Cash is the lifeblood of small businesses that keeps daily operations running, and most businesses that fail do so because of cash problems. Despite this, too many small business owners struggle to manage cash flow effectively.

Of course, late payments don’t help. It’s a huge issue – we found that 83% of small businesses have to deal with payments that are made after the agreed date. And, around one in seven small business are paid late more than half the time by their business or public sector customers.

Recent research from BACS Payment Schemes showed that this late payment problem is causing more than one-third of small businesses to have difficulties with cash flow - a figure which is also reflected in our research. According to this study, 43% of respondents experienced late payments during 2018 and, of these, 78% of had to wait more than a month beyond their agreed terms before they were paid.


Intuit QuickBooks, found that UK small businesses have on average £31,055 in debts owed to them. Collectively the issue of late payment costs British small businesses around £2.5 billion a year.

Late payments are more likely to affect the cash flow of small businesses than larger organisations, as they are more reliant on these funds. While bigger organisations can absorb the hit more easily, chasing invoices and bad payment practices may mean small businesses run out of accessible cash, which can impact their ability to pay their staff, suppliers or take on new work. It can also take up a lot of valuable time, which could be better spent on developing the business. It’s no wonder, then, that the QuickBooks research also found that 71% of small business owners have lost sleep worrying about their cash flow.

So, once you’ve covered the basics, like ensuring the invoice has been received, the details are accurate, and made an initial friendly phone call to check they’ve not just forgotten, what can you do about late payers?


It’s always a good idea to keep a close eye on whether your customers may be having financial difficulties that might cause them to pay you late, or not at all.  Putting a strong late payments policy in place, such as outlining what additional charges your clients will face if they don’t pay on time, can also be effective in maintaining cash flow.


If the time you’re spending chasing payments is an issue, automation can help – there are systems which will automatically nudge your clients to hurry up and pay, rather than you having to repeatedly attempt to contact them by letter or phone.

But sometimes even multiple reminders, whether automated or not, still aren’t enough to spur a late payer into action. If that’s the case, it’s time to think about taking the next step.

Expert Help

If you’re unwilling to write off the debt, you could always hang in there to see if more reminders will eventually pay off, although in our experience, this rarely works. Alternatively, you could involve a third party – either a debt collector or a solicitor. This has several advantages. It saves you time and stress, can help preserve your relationship with the client, and offers a high success rate.

The first thing the third party will do is send your debtor a letter from a solicitor, which in the majority of cases is enough to cajole most people into paying.

On the rare occasion that this letter doesn’t result in payment, you will need to escalate things further. ‘Amicable collections’ would usually be the next step. This is where a specialist team will try to open a constructive dialogue with the late payer, to negotiate an amicable and timely solution to the outstanding debt, avoiding the need to resort to legal action.

Unfortunately, sometimes the only solution is to take a debtor to court. This can seem daunting but it’s usually worthwhile, especially as legal fees can be recovered from your debtor if your claim is successful.  But thankfully it often doesn’t get that far - many debtors pay as soon as they receive a claim form from the court.

Take back control of your cash flow

It’s time to get the money you’re owed thanks to FSB Debt Recovery. Step-by-step guidance on chasing late payments, 24/7 support, free DIY template letters and clear, discounted legal costs.

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