UK Unpaid Invoice Complaints – Which Sectors Have Been Most Affected?

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18 September 2020 | Updated 25 September 2020

Business invoice payments have undoubtedly been disrupted by the impact of COVID-19, with some industries and regions already affected more than others.

It’s no surprise that many companies have reprioritised out-payments as they deal with issues at hand, however this has the knock-on effect of breaking many contracts and contributing to the backlog for court where debt collection fails. Even high profile cases are feeling the delays caused by socially-distanced judging and the period of non-operation. By contrast with some parts of the civil justice system, technology has not provided solutions to enable trials to go ahead in the magistrates’ courts and the Crown Court at anything close to normal levels. 

Aside from the legal system struggle, many businesses without substantial financial reserves may be seriously affected by late or missed payments, when committed work doesn’t go ahead because of pandemic regulations. It is also likely however that the clients are not able to see returns on their investments– undoubtedly both sides of many deals are similarly affected and troubled.
 

Invoice Complaints in Business Sectors

The UK Domain, the online business resource, submitted a Freedom of Information request to the Small Business Commissioner (SBC) to reveal the locations and business sectors most impacted by unpaid invoices in the private sector. Between December 2017 and 8 July 2020, there were 429 complaints made relating to unpaid or late invoices. Furthermore, the data revealed the business sectors that were most affected by late or unpaid invoices. 

The highest percentage of invoice claims were from Business Services (23 per cent). According to the SBC, Business Services is any service that supports commercial activity. This could include advisory services, reprographics, design, promotions, HR advice, Health and Safety, marketing, consultancy and recruitment.

However, due to the relatively high number of cases in the consultancy, recruitment and marketing areas of business services, the SBC has subsequently begun recording complaints in these areas separately to enable them to drill down into this sector. The SBC said: “In a service-based economy, it is perhaps unsurprising that business services feature highly for the receipt of complaints”.

Following closely behind were those in the Construction and Engineering (14 per cent) and Retail sectors (ten per cent). Consumer, Financials and Recruitment (one per cent) on the other hand, were the sectors with the lowest amount of claims to the SBC.

Picture: A graphic showing percentages of which business sectors submitted late or missed invoice complaints

Locational Density

The regional data pinpoints the locations where businesses had the most trouble collecting their overdue invoices. Companies submitting the highest number of invoice complaints were those located in Greater London (12 per cent). This closely followed by West Midlands (nine per cent) and the North West (nine per cent). One per cent of invoice complaints were from those situated in Northern Ireland, Wales and Yorkshire. Businesses in the North East, on the other hand, had no unpaid invoice complaints submitted to the SBC.

Picture: A graphic map showing percentages of areas that submitted late or missed invoice complaints

Getting Invoices Paid

If these statistics were more month specific they might show an increase in traffic from February onwards (at the beginning of COVID-19 management measures in the UK). If the equivalent information is accessed for the next few years, we can suggest it will not look better in light of this year's economic issues– especially if there is a second lockdown. What can be considered most efficiently to act against this? The UK Domain has a few tips for concerned businesses:

• Set up payment terms that incentivise prompt payment – Either by setting a late payment fee or interest, or by offering a discount to those that pay you in advance of the invoice due date.
• Know when and how to chase up late invoices – Take a gentle approach to start, using a gentle nudge around the time of the invoice due date. If things continue a month after the due date, it may be time to consider taking things a little further.
• Have a plan for those that never pay on time – It may be that you have the same culprit time and time again missing invoice due dates. Make sure to have your clients sign an agreement stating that they will pay on time and include late fees or interest rates on late-payment.

Picture: A graphic of a document, stationery, calculator and coins

Article written by Bailey Sparkes | Published 18 September 2020

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