New research by Direct Line business insurance has found that 81% of tradespeople are owed money and are currently chasing £6,210 on average.
Half of tradespeople said they have seen a rise in the number of customers disputing invoices, and a further 42% say they are chasing more late payments now than they were last year, as the problem is getting worse.
The research revealed that 73% of tradespeople are chasing multiple overdue payments, fighting to secure an average of seven late payments. A total of 32% of those owed money are currently chasing outstanding invoices worth £2,500 or more, with 9% owed more than £25,000. A further 15% are currently chasing 10 or more payments.
Late payments don’t just impact on tradespeople financially, it found, with 32% of tradespeople feeling anxious as a result and 22% feeling annoyed or stressed.
The findings showed that 22% of tradespeople worry that pursuing late payments takes time away from work. A total of 20% said that late payments leave them unable to cover their family and personal expenses, while 18% say it causes difficulties running their business. A further 13% of tradespeople worry about the cost of getting legal advice if their clients don’t pay on time.
The study also found that 84% of tradespeople said that they had applied to make a claim for outstanding payments through a small claims court, with 48% being successful. This is an increase on the 34% who confirmed they were successful when asked in 2023.
On average, the largest single invoice tradespeople have given up chasing comes to £4,390, with 22% losing out on payments worth over £2,500. A total of 8% have had to give up a payment of over £10,000, with just over one in 20 writing off an invoice of £25,000 or more.
In an attempt to counter this, 36% take half of the payment up front and the remainder once work is complete, 21% send invoices well in advance and chase for the payment nearer the due date, while 19% charge a ‘late payment fee’ to discourage clients from paying late, as well as 19% offering discounts for paying quickly.
Alison Traboulsi, product manager at Direct Line business insurance, said: “Late payments can quickly become a big problem for small and independent businesses, leaving them unable to cover personal and business expenses, resulting in cash flow problems, stress and legal headaches. Pursuing late payments is time consuming and eats into the time that could be spent working or with family and friends.
“Research from the Office of the Small Business Commissioner shows that late payments cost small business owners £2.5bn each year, and we know it is a major issue for tradespeople. It’s concerning to see the value of invoices tradespeople have had to write off and that many tradespeople are seeing a rise in the number of customers disputing invoices and the number of payments they need to chase.”