New research has revealed that tradespeople are currently owed on average £6,984 which is past the due date for payment.
The research from Direct Line insurance found that on average, the largest single invoice tradespeople have given up chasing on payment comes to £4,757 with nearly a quarter (24%) losing out on payments worth over £2,500. Furthermore, 78% have at some point tried to make a legal claim to recover payments, while 57% were either unsuccessful in their claim or still have unresolved claims.
As a result, 23% worry about not being able to cover their family or personal expenses and one-in-five (21%) are concerned about how late payments are impacting their mental health.
Nearly one-in-five (19%) worry about the cost of getting legal advice for chasing down late payments, with 20% worrying that the time spent chasing invoices prevents them from getting on with their primary job. Moreover, 18% of tradespeople say that late payments could lead to them filing for bankruptcy, with 17% saying that late payments would impact their ability to pay themselves or their staff on time.
Research from The Institute of Chartered Accountants in England and Wales (ICAEW) revealed that late payments cost small business owners £684m each year. The current economic environment may be making the situation worse, with half (51%) of tradespeople stating the ongoing cost-of-living crisis has impacted the number of late payments they are receiving.
To prevent late payments, over a quarter (27%) of tradespeople refuse to start work until they receive up-front payment in full, with a quarter (25%) choosing to take payments immediately with a card reader or mobile payment. Nearly a quarter (24%) charge a ‘late payment fee’ to their clients, and the same number of tradespeople take half of the payment in advance and then the remainder once work is complete. A fifth (20%) of tradespeople offer discounts to clients for paying quickly.