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The Impact Covid 19 on Late Payments – An Update

In the previous article on this subject, we explored the impact of the pandemic on late payments to small businesses.

Following the budget announcements, what impact will this have on small business owners who are least able to weather the storm of cashflow issues? 

As previously discussed, in June 2019 the Government announced a series of Late Payment Reforms, which as of June 2020 had not been enacted due to the impact of the global pandemic.

The report by the Federation of Small Business – ‘Late Again – How the coronavirus pandemic is impacting payment terms for small firms’ (FSB Report June 2020) made the following key findings

  • 62% of all small businesses have experienced either an increase in late payments from customers (44%) and/or had their payments frozen completely (30%) as a result of COVID-19.
  • 10% of all small businesses have experienced an increase in payment terms from customers as a result of COVID-19.
  • Of those small businesses supplying B2B, 65% have experienced either an increase in late payments from customers (53%) and/or had their payments frozen completely (29%) as a result of COVID-19.
  • Of those small businesses supplying to B2PS, 63% have experienced either an increase in late payments from customers (55%) and/or had their payments frozen completely (23%) as a result of COVID-19.
  • Of those small businesses supplying B2B, 13% have experienced an increase in payment terms from customers as a result of COVID-19. 

While Payment Reforms enactment awaits, support for small businesses has now been announced in the form of Business Grants which the FSB state will provide ‘a much-needed lifeline to small firms’. (FSB Report March 2021).

However, as noted in the findings of the FSB June 2020 report, ‘sectors which have seen the largest increases in late payments are those which traditionally operate on credit-based terms.

Wholesale, for example, has seen the largest increase in late payment, whereas accommodation and retail-based businesses have seen much lower levels of late payment. 

Sectors such as retail, accommodation, and food and beverage services have seen lower levels of late payment, as the majority of transactions are made in real time between the business and the consumer, however each will still have a number of interactions in a B2B supply chain before reaching the customer. 

This is likely to account for some of the increase in late payment shown above. 

It is also worth noting that while these sectors may have seen relatively small increases in late payment, they are also the sectors most likely to have either ceased trading due to government restrictions, or seen cancellations. 

Professional services, such as legal and accounting, have also seen a noticeable increase in late payment due to COVID-19, again reflecting the nature of their services and billing systems’. FSB Report June 2020.

The FSB concluded that ‘late payment has increased in all sectors as a result of COVID-19, however it is most severely felt in industries which predominantly work in B2B/ B2PS supply chains, as opposed to those businesses which are day-to-day consumer facing – providing those businesses haven’t already closed’. (FSB Report p15)

It thus remains to be seen how much the support announced today will benefit small businesses, as the support in the main targets businesses who have been unable to operate or trade during the pandemic. For example, the £5 billion available to business in the form of ‘Re Start Grant’ is only available to businesses that have been forced to close by the Coronavirus restrictions. Further, the 100% Business Rates Holiday and subsequent 66.6% reduction is only available for qualifying sectors (retail, leisure, and hospitality).          

How Athena Debt Recovery Can Help

Here at Athena Debt Recovery, alongside the government’s promised actions, we can assist you in recovering your small businesses late payments. Our hassle-free practises enable us to give you the best chances of reimbursement without issuing legal proceedings.

With our extensive experience and knowledge within debt recovery in the North West, we will assess your financial needs and position so that we can determine the most effective, high-value solution that adheres to the Late Payment of Commercial Debts (Interest) Act and Regulations where possible. 

Once identified, we will deliver you with a cost-neutral collection that minimises the risk of you losing business. We are the key to your businesses late payment compensation. If you’d like further information on how our services work, visit our website or contact us today on 0161 836 6630.

We understand cash flow is prominent more than ever, and to try and end this recession, small firms that make up 99% of our business community must be paid in order to keep our economy functioning. With the government promising an end to this a year ago, further support will be your best chances at being reimbursed so that your business can continue operating.

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