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October 14, 2019updated 08 Nov 2019 12:38pm

Hitachi: more small businesses taking legal action on late payments

By Athena Chrysanthou

Research from Hitachi Capital Business Finance has found 40% of small business owners are taking legal action against customers not paying them on time.

The research also found that many bosses are foregoing their own salary to ensure their employers are getting paid on time.

Unpaid invoices are affecting cashflow for business owners with one in five not paying themselves as a result. For smaller ventures with less than 10 employees, 40% of small business owners are not getting paid.

Since 2018 issues of late payments for small business owners has increased. There has been a 22% rise in the number of small business wasting time and money on legal action to chase a late payment.

There has also been a 14% rise in SMEs being unable to pay suppliers because of late customer payments.

The cashflow challenge has forced more than 35% of small businesses to seek short term borrowing options to make ends meet.

Gavin Wraith-Carter, managing director at Hitachi Capital Business Finance, said: “It is disheartening that so many small business owners feel impeded because their customers are not paying on time and, for many, this wreaks havoc with their cashflow.

“The fact many small business owners are sacrificing their own salary also means they are literally taking their business worries home with them.”

In addition, almost 38% of business owners said late payments placed a huge risk on their supply chain, with 31% saying because of this their relationships with suppliers, clients and customers was greatly affected.

Some 40% of businesses trading for more than 35 years were most worried about having to take on short-terms loans to make ends meet.

In addition to this 62% said they pursued legal action as a result of late payments, which was the highest out of the report.

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