The impact of late payments on cashflow is well-known, however a recent survey shows that late payments come with additional consequences for those businesses affected.
The survey of 1,233 British businesses commissioned by employee spend management firm, Concur, found that 4 in 10 of those businesses were feeling the impact of late payments. The way those businesses responded to late payments, however, was the most concerning part of the survey.
21% of medium sized company owners taking part in the survey said they would halt planned investment if their biggest customer failed to pay an invoice beyond 90 days. 14% said they wouldn’t pay salaries if this was the case and 15% said they would cut innovation spend.
So, the consequences of late payments are not only immediately having an impact on those businesses affected but also a longer term impact when investment in innovation and equipment is taken into account making those businesses less competitive in the future.
If a business is barely surviving and classed as one of the UK’s many ‘Zombie businesses’ operating from one month to the next, then one missed payment can quickly sink those businesses leading to insolvency and bankruptcy.
With this in mind it is important to take steps to recover debts as soon as a payment deadline is missed to reduce the impact on the business and increase the chances of survival.