Over three million self-employed Brits lose out to a massive £8.1 billion a year after being forced to give up chasing late payments from customers.
Split between sole traders, this accounts for an average of £2,472 each per year of lost income, and sadly, it seems that the trend for late payments to small businesses too is on the increase. Three in ten (30%) sole traders have given up on a payment in 2016, compared to 23% of those surveyed in 2015. Worryingly, if this trend is repeated across all of the UK’s sole traders, it means 990,000 businesses have lost out on money this year, up 231,000 from last year.
The problem hits its peak in the South West, where 37% of sole traders find themselves giving up on money they are owed by customers. Comparatively, self-employed traders in the West Midlands appear to have a better relationship with their customers, with only one in five (21%) saying they have resorted to abandoning the chase for late payments.
Late payments are in fact the most common reason for a business cash flow crisis, which can cause a domino effect of issues for both sole traders and small ventures. In fact, late payments aren’t just affecting the self-employed, with British small and medium enterprises (SMEs) losing out significantly too.
In an attempt to diversify and claw back some cash, sole traders are turning to mobile payments in an attempt to capitalise on the rise in use of mobile banking apps by consumers, according to recent BBA research. 66,000 small businesses now accept mobile payment services, a figure which has doubled from last year.
Craig Tillotson, executive chairman of Paym, said: “It is worrying to see that late payments are a growing problem for Britain’s sole traders. Chasing late payments eats up valuable time, so it’s understandable that an increasing amount choose to cut their losses. However, the chase for payment can be countered by offering customers alternative methods of payments."
Unfortunately, even when the customer is willing to pay up, sole traders are still losing out with cash payments. Nearly a third (32%) of sole traders admit to rounding payments down for customers that don’t have the right amount of change on them and therefore end up further out of pocket.