The average tradesperson is chasing over £6,000 in late payments

With the average UK tradesperson owed more than £6,000, and many chasing more overdue payments now than they were last year, it’s clear that there’s an increasing problem with unpaid invoices in the sector.

How many tradespeople are affected by late payments?

Insurer Direct Line has reported that 81% of tradespeople are currently owed money, chasing an average of £6,210. Almost three quarters (73%) are pursuing multiple overdue payments, with an average of seven outstanding invoices across those surveyed, while 42% are chasing more late payments now than they were last year.

This highlights an increasing issue, which could be caused by a number of factors, including the rising cost of living and other financial pressures faced by customers. With half of tradespeople stating that they’ve seen a rise in customers disputing invoices, this could suggest a lack of clarity around costs and payment terms, or attempts by some customers to avoid paying the full amount.

How does late payment affect tradespeople?

Late payments of course have a huge financial impact on tradespeople dealing with unpaid invoices. For electricians, builders and other contractors, there are often up-front costs for labour and materials associated with their work. When customers fail to pay for a completed project on time, tradespeople find themselves out of pocket and may struggle with cash flow to get started on the next job.

A fifth of tradespeople (22%) also said that chasing late payments is taking time away from work. This means that they’re less able to focus on finding new clients and carrying out paid work, which can add to their financial burden.

Along with monetary concerns, late payments also have an impact on the mental wellbeing of self-employed individuals. Direct Line’s research found that 32% of tradespeople feel anxious as a result of late payments, 22% feel stressed, and 17% feel overwhelmed. This can have a serious impact on their mental wellbeing, and could cause long-term issues with stress and anxiety that make them unable to work. With many tradespeople being self-employed without healthcare or insurance, the inability to work for long periods of time could be financially devastating.

How can tradespeople avoid late payments?

While it’s not always easy to get hold of overdue funds, there are various measures that tradespeople can implement to avoid payments falling into arrears in the first place.

Top tips for handing a late invoice payment as a self-employed tradesperson include:

– Collect payment immediately on-site after completing a job using a mobile payment device or having the customer pay by BACs.

– Clearly state payment due dates on invoices or contracts to avoid confusion.

– Ensure that your payment terms are clearly outlined, including details like interest or late payment fees.

– Issue invoices promptly to encourage timely payments from customers.

– Use invoicing apps to speed up the process and send automatic payment reminders.

What support is there for tradespeople affected by late payments?

The UK Government has recently unveiled a support package for small businesses and the self-employed to tackle the scourge of late payments. The new Fair Payment Code will replace the existing Prompt Payment Code, and will reward businesses for paying suppliers quickly and treating them fairly.

It requires businesses to report their payment practices and gives them Bronze, Silver or Gold awards based on promptness of payments, as well as encouraging self-employed individuals to check whether a business is a Fair Payment Code signatory before entering into a contract with them. While this doesn’t help with late payments from domestic customers, it’s a step in the right direction and a sign that the Government is taking this issue seriously.

If at any point you need professional help or advice on handling late payments, the Government offers a Business Support Helpline, which you can contact on 0300 456 3565. They will be able to answer any questions you may have about your legal position, and guide you through the claims process, should you choose this route.