New research from Direct Line business insurance reveals tradespeople are currently owed an average of £6,984 past its due date for payment.
Late payments are a long-standing issue and many tradespeople have had to write off significant sums. On average, the largest single invoice they have given up chasing on payment comes to £4,757 with nearly a quarter losing out on payments worth over £2,500. More than three quarters have at some point tried to make a legal claim to recover payments. Over half were either unsuccessful in their claim or still have unresolved claims.
At a time when expenses are rising sharply due to inflationary pressures, late payments are significantly impacting tradespeople’s personal lives, business operations, and mental wellbeing, says Direct Line. Almost a quarter worry about not being able to cover their family or personal expenses, and one in five is concerned about how late payments are impacting their mental health.
To reduce the impact of late payments on their business, many tradespeople are changing the way they bill for their work. Over a quarter refuse to start work until they receive up-front payment in full, with a quarter choosing to take payments immediately with a card reader or mobile payment. Nearly a quarter 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 per cent) of tradespeople offer discounts to clients for paying quickly.
Alison Traboulsi, Product Manager at Direct Line business insurance said: “Tradespeople are vital to the UK economy, and it’s worrying to see that so many are struggling to get paid on-time. Their time is hugely valuable, so effort spent chasing monies owed could prevent them from taking on more work or completing jobs on time. Late payments can also have a huge impact on business operations, finances and, at times, tradespeople’s mental health.
“Times are tough and it is difficult to see so many tradespeople miss out on payments they are legitimately owed due to concerns around legal costs, amongst other reasons. Direct Line business insurance policies come with Legal Essentials, a service that provides tradespeople with unlimited access to a team of DAS legal experts for confidential legal advice and access to a library of legal templates, tools, and guides to help them run their business, including guidance on how to pursue late payments.”
