Late payments do growing damage to business owners’ mental health

Late payments are becoming a greater source of mental health issues like stress, anxiety and depression. Find out how to respond to the most common excuses for delayed payments.

The number of business owners suffering from mental health issues has rocketed in the last year thanks to late payments.

Half of SME owners’ businesses – 23 per cent more than last year – have been teetering on the edge of bankruptcy or liquidation because they are being paid late.

Over half (52 per cent) – nearly a quarter more than last year – blame poor cash flow for their panic attacks, anxiety and depression. Some are even having suicidal feelings and experiencing emotions of severe anger.

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Impacting their lives

Most owners (63 per cent) have not paid themselves ‘for some time’, 42 per cent stop or delay bonuses, 20 per cent have to pay staff late and 17 per cent reduce their own salary.

Matters will worsen if customers continue to pay late; 53 per cent said it will soon affect the progress and growth of their business. Meanwhile, 42 per cent said that it has already impacted staff morale, recruitment and retention, 35 per cent struggle to pay business rates and 31 per cent struggle to cover mortgage or rental payments on their office.

A worrying 14 per cent of SME owners have put plans on hold to grow their family, while 19 per cent can no longer afford to pay for school trips, clubs or tuition fees for their children.

What’s more, 25 per cent have to cut back on social activities like going to the cinema or eating out, 19 per cent cancelled their family holiday and 16 per cent have sold or downgraded their car.

Dealing with late payment excuses

Hugh Gage, managing director of The Prompt Payment Directory, has teamed up with Nicki Kinton of NK Credit Consultancy to give you some tips on how to respond to these classic late payment excuses.

‘We can’t afford to pay the bill’

The first step here is to stop supplying them so that the problem doesn’t get worse, then agree a payment plan to reduce the debt.

If they still want supply from you, establish what their plan is to get out of their situation and check if it’s viable. If you do carry on, protect yourself with terms which include payment with order – an instruction to the buyer’s bank to make a payment or series of payments to you on an agreed regular date.

‘The accounts person isn’t in/is away’

Tell them that you shouldn’t have to wait until the next time they’re in the office to get paid. Remind the customer of any provision around late payment such as charging of interest and how their intervention will keep any additional costs in check.

‘Your cheque is in the post’

Ask for the date it was sent, the class of postage and the cheque number. If they can’t give you a cheque number, ask why not.

If more than a week has passed, ask them to cancel the cheque and send replacement by BACS/Faster payment and assure them that the cheque will be returned or destroyed if it does arrive.

Further reading on late payments

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Anna Jordan

Anna is Senior Reporter, covering topics affecting SMEs such as grant funding, managing employees and the day-to-day running of a business.

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