Tip of the Iceberg

Hugh Gage, founder of the Prompt Payment Directory shines the spotlight on the wider ranging issues caused by late payment.

I have, in the past, written about the scourge of commercial late payment describing it as an iceberg issue. The obvious simile being that it is a huge and very dangerous problem affecting the UK economy, but with comparatively low visibility owing to the fact that it’s often talked about in hushed tones, if at all.

Suppliers are loath to mention it for fear of upsetting their customers. As the Small Business Commissioner, Paul Uppal has said recently, suppliers take the view they’d rather have very bad customer relationships than no relationship at all.

And yet the problem runs into billions of £££s. It not only costs suppliers but also the exchequer. The Federation of Small Business reported that in 2014 late payment cost the UK economy in the region of £2.5 billion and caused 50,000 businesses to go under.

As we head towards Brexit, we also have to think about the reputational damage to the UK as a place to do business. Germany, for example, does not have this problem to anything like the same extent we do. The last thing this country needs is a bad reputation as a place to set up a business.

However there is another aspect to all this which is even less well reported. That is the impact that late payment has on the wellbeing and mental health of both business owners and managers in the UK.

Recent research by The Prompt Payment Directory shows that more than half of all small business owners and managers have suffered from depression, anxiety, increased stress, or other mental health related illnesses as a result of late payments.

68% report losing sleep due to late payment, and a persistent lack of sleep can often be the gateway to mental health issues.

Not only that but the situation appears to be worsening. The proportion of people reporting mental health issues because of late payment has also risen since last year by nearly 80%.

It’s hardly surprising that business owners are feeling the stress when one considers that the data also shows how 42% of respondents have had to stop or delay staff bonuses while 63% have had to forgo their own salary to help make ends meet in their business.

The difficulties are also spilling into other areas of life with nearly a fifth reporting that stress from late payment is affecting their relationship and in some cases causing them to fail.

The main areas of mental health problems are stress, insomnia, depression and extreme anger. For those in the construction sector this is all familiar territory with over a fifth of respondents claiming they have experienced extreme anger as a result of the notoriously poor payment practices they are exposed to.

The Department of Health has reported that the wider economic costs of mental illness in England have been estimated at £105.2 billion each year. This includes direct costs of services, lost productivity at work and reduced quality of life. It reinforces the fact that poor mental health and the causes of poor mental health, quite apart from anything else, are not good for the U.K. economy.

As the research by Prompt Payment Directory shows, the late payment problem is clearly a contributory factor and as the ranks of the self employed continue to grow this is an increasingly urgent matter.

There is no single panacea for the problem of late payment. However, there are many different initiatives currently in play to help tackle it; these include the vital work being done by the office of the Small Business Commissioner, the Duty to Report, and the various private sector initiatives such as the Prompt Payment Directory – a service where suppliers can anonymously rate the payment practices of their customers, rather like a TripAdvisor for business payments.

It’s vital that the issue of late payment is addressed not just after the fact when the debt becomes outstanding, but also before the fact as part of the due diligence process. The more suppliers begin to think like this, the fewer who will face the choice between having a bad business relationship or none at all.

About The Prompt Payment Directory

The Prompt Payment Directory is a service set up by company founder and Managing Director, Hugh Gage in response to the late payment of commercial debts within the UK’s business community. Further information can be found at https://www.thepromptpaymentdirectory.co.uk/

Note: The views and opinions expressed in this post reflect those of the contributor and not necessarily those of the Small Business Commissioner; nor should this be taken as an endorsement of third party products or services mentioned.

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