We can all agree I’m sure that getting paid late is frustrating. Why then do we often take so long to do anything about it?

In our blog Is the Credit Control Call Dead? we looked at some of the reasons why we may not be as effective in chasing for payments as we could be. Here we look at what that delay could actually be costing your business.

According to government research, late payment costs the UK economy almost £11 billion a year. And that’s only the costs you can measure in monetary terms. Yet intangible costs have a negative effect too.

Time

The same research found that businesses affected by late payments spend on average 86 hours a year chasing invoices. That’s 133 million staff hours across the UK economy. What could you be doing with that time instead?

Alternative Funding

The most obvious cost to a business is the cost of finding alternative funding. Payroll, rent, supplies and other operational expenses do not stop to wait for customer payment. There is a cost to using other sources of cash, whether a banker, a private lender, or personal resources. There’s always a cost involved.

The Impact on Your Suppliers

When your clients pay you late, the pressure often passes straight down to your suppliers. You end up paying them late too, which damages your relationship and your reputation with them.

Late payment is often seen as a sign that the buyer is in difficulties. If you create that impression with your suppliers, you may find that their terms worsen next time you place an order, or that they become reluctant to extend credit to you at all.

Late Payment Charges

Aside from statutory remedies for charging interest on late payment some of your contracts may include extra administration charges for handling of late payments and failed direct debit collections.

Poor Credit Score

Paying your suppliers late will have a negative effect on your credit score. This in turn will make it harder for you to secure alternative funding and other suppliers.

For more details about the implications of paying your suppliers late, read our blog, Why you should pay your invoices on time.

Mental Health

“It can be discouraging, frustrating and divisive when payment is slow. We’ve written in more detail about the mental health impact of cash flow stress here.

Business Failure

The ultimate cost to a business – shutting up shop!

According to government statistics, 38 businesses close every day as a result of late payment. That’s over 14,000 a year. Late payment isn’t just a cash flow problem. For too many businesses, it’s the reason they don’t survive.

The Cost of Giving Up

There’s another cost that rarely gets discussed. A 2025 survey by GoCardless and the Federation of Small Businesses found that 52% of small businesses forfeit late payments up to ten times a year simply to avoid the time and cost of chasing them. That’s money written off not because it can’t be recovered, but because the process feels too hard.

Not feeling the pinch?

You may think none of this applies to you – there’s always enough money in the bank account to pay the wages and the bills. Yet, the following costs still apply as long as you have invoices that are overdue for payment.

Administrative Costs

The administrative burden of debt recovery involves staff time, internal tracking systems, postage and phone expenses. Not to mention legal expenses if it gets that far. There tends not to be separate tracking for such things – so often they’re lost in overall admin expenses.

Reduced Sales Value

The longer a debt is outstanding the harder it gets to recover. With administration costs surrounding an old debt increasing, it’s tempting to do a deal to get some payment in. I get the rationale ‘something is better than nothing’. But write-offs mean unrecovered costs and lost profits.

Planning and Cash Flow Forecasting

If you can’t rely on the invoice due date to indicate when you’re going to get paid how can you create a cash flow forecast? And without a cash flow forecast how can you make plans for the future of your business?

Additionally with slow paying customers, you’ll need to plan to keep a portion of your cash set aside on the off chance. You may or may not have to use additional resources to recover payment – all of which cuts into profitability.

Lost Opportunities

When your money is in your customers bank account you can’t use it. You could use that money to support new sales, employ new staff, buy new equipment, or give yourself a dividend. But it can’t do any of that if it’s not in your bank account.

We’ve heard stories of businesses looking for loans to grow their business when the money they need is sitting in their debtors’ ledger. They simply have to collect it in. They won’t chase for the money for fear of upsetting customers but are happy to incur the extra costs of a loan!

Competitive Disadvantage

Several things will make it harder for you to compete for market share or even to maintain your existing share. They include:

• The inability to take opportunities as they present themselves
• Reputational damage caused by late payment to your suppliers
• A poor credit score

The moral of the story? Don’t leave credit control to chance. You need to work at it. And, even if you’re not experiencing cash flow problems, there are improvements you can make to benefit your business’s future.

If you’d like to explore how to reduce the cost of late payment to your business, get in touch.