Unpaid invoices affecting small businesses across the UK

The unprecedented impact of the coronavirus pandemic has caused major disruptions in everyone's lives.

Unpaid invoices affecting small businesses across the UK

The unprecedented impact of the coronavirus pandemic has caused major disruptions in everyone’s lives.

For those owning a small business, the time for innovation and change is definitely now, with many small businesses having to adapt quickly to the constantly changing landscape.

And whilst it is never an easy task attracting new customers and maintaining profitability, the pandemic has seen many small business owners face down tough times with quick and effective operations that have turned losses into booming business!

Even for those businesses that unfortunately had to shut their doors, many have gone online and created brand new websites in just a matter of weeks to be able to continue providing their community with their services. 

But, now that England is facing down its second lockdown, businesses up and down the country will be looking at yet more obstacles to overcome in the next month, and the last thing small business owners need is an unpaid invoice to deal with.

But how likely is that going to affect a small business’ revenue, and exactly what sectors will be hit the hardest? 

Recent research by The UK Domain, the free online resource for businesses, has revealed the true number of late and unfavourable payments across the UK, severely affecting a variety of sectors and their ability to keep their doors open. 

After submitting a Freedom of Information request to the Small Business Commissioner (SBC), the business sectors that have been most impacted by unpaid invoices in the private sector have been disclosed, as well as the locations where the most impacted businesses are in.

The figures show that between December 2017 and the 8th of July 2020, there were 429 complaints recorded overall, relating to unpaid invoices, as well as late invoices. 

Despite these invoices affecting many sectors across the country, the highest percentage of invoice claims were actually from Business Services.

According to the Small Business Commissioner, ‘Business Services’ is any service that supports commercial activity. This could include advisory services, reprographics, design, promotions, HR advice, Health and Safety, marketing, consultancy and recruitment. 

It is within these businesses that 23% of all unpaid or unfavourable invoice claims are being recorded. 

However, due to the relatively high number of cases in the consultancy, recruitment and marketing areas of business services, the Small Business Commissioner has subsequently begun recording complaints in these areas separately to enable them to drill down into this sector. 

The Small Business Commissioner said: In a service-based economy, it is perhaps unsurprising that business services feature highly for the receipt of complaints.

The sectors following closely behind were those in the Construction and Engineering. No industry is immune to this crisis and this sector is no different, as many businesses will be looking at preserving their profitability rather than investing in new premises. 

Businesses in the Construction and Engineering sectors’ recorded 14% of complaints, with Retail sectors following closely behind them with 10% of complaints.

Those owning small businesses in the Retail sector have faced difficult circumstances that they have spent the last nine months trying to navigate. 

However, many small business owners in the Retail sector have quickly adapted to the constantly changing restrictions, and have actually managed to turn their in-store sales to online sales with brand new websites and online promotion.

On the other hand, it was Consumer, Financials and Recruitment sectors that had the least amount of claims of unpaid or unfavourable invoices recorded with the Small Business Commissioner. 

Each of these sectors recorded just 1% of these complaints.

The Freedom of Information request also revealed interesting data regarding the location of the businesses most affected by these unpaid or unfavourable invoices.

Companies submitting the highest number of invoice complaints were those located in Greater London with 12% of complaints being recorded in this location to the Small Business Commissioner.  

Businesses in the West Midlands recorded 9% of complaints, similarly to the North West who also recorded 9% of complaints.

Those who own businesses in the East of England saw just 4% of complaints being recorded, closely followed by those in the East midlands, where 3% of complaints were made.

Small Scottish businesses made up just 3% of complaints, whilst businesses situated in Wales and Northern Ireland seem to have avoided this issue more than others as they only recorded 1% of invoice complaints.

Business owners in the North East however, did not make up any of the recorded invoice complaints made to the Small Business Commissioner.

With this data, we can clearly see that unpaid or unfavourable invoice payments are not limited to specific sectors or locations across the UK, and as England enters a second lockdown small business owners will be under much more pressure than usual to maintain profitability and will instead need to look ahead and plan for the long haul.

Whilst many small business owners are sure to continue to surprise us with original and unique ways to maintain profitability, it may be that small business owners’ priorities may lie in securing their unpaid invoices to help get them through these turbulent times.

Chasing up invoices can be a difficult issue to navigate, but taking a gentle approach to start, with a nudge around the time of the invoice due date. If things seem to be taking longer than you’d like though, it may be time to consider taking things further. 

But there are plenty of ways to ensure your invoices get paid on time to avoid these difficult conversations.

Setting up payment terms to incentivise prompt payments, such as a late payment fee, can encourage those who know payday is coming up to be on the ball. This technique is definitely helpful for those who always seem to miss the invoice due dates!

Sam Sweetland
Sam Sweetland

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