Late payments affect mental well-being of UK SME owners

SME owners were probably not told when they started their businesses that their mental well-being would be at stake, and that it would suffer when they are owed money by their customers.

Almost half of the entrepreneurs in the UK surveyed in a study by Xero and PayPal have admitted that late payments resulting in poor cash flow keeps them up at night worrying.

The report was based on research carried out by Loudhouse and involved online interviews in 2019 with owners and managers of 532 British small businesses, who invoice at least 50% of their payments online.

One of the points made by the report is something business owners do not talk so much about – mental well-being, which the report points out is as essential to running a business as managing cash flow. Thriving at Work, a report commissioned by the UK prime minister and led by Lord Dennis Stevenson in 2017, revealed that poor mental health costs the British economy up to £99 billion every year.

The research also found that 52% of small business owners have used their own money, or that of their friends and family, to keep their businesses going. Late payments might not just damage the finances of small businesses, they can also compromise the business owners' personal finances and relationships.

About 44% say that late payments have affected their mental health. Worrying about late payments isn’t just worrying about money troubles. About 45% of business owners said they feel they have failed their company when they are cash flow negative.

Sleep deprivation is also a problem common among 43%, who say they have had sleepless nights worrying about their business’ cash flow. Poor well-being due to cash flow issues has led to 37% of entrepreneurs having considered giving up their businesses entirely over the last one year.

Conversely, the survey also revealed getting paid on time can have a dramatic effect on the happiness of small business owners. When asked how they would feel if cash flow was no longer an issue, about three quarters (76%) of the entrepreneurs surveyed agreed that having a business would feel more ‘worth it’ and almost as many (73%) said they would feel more optimistic about their business.