The hidden cost of running a small business (and tips to deal with it)
Sabuhi is a small business journalist and shares her own experience running a PR firm called Small PR and the challenges that come with being self-employed and chasing invoices. Having held both. . .
Sabuhi is a small business journalist and shares her own experience running a PR firm called Small PR and the challenges that come with being self-employed and chasing invoices. Having held both (freelance/contract) self-employed and staff roles in the media for over 20 years, she shares her tips for managing clients and getting paid on time. Thirty days have passed and still no joy. You still haven’t received payment for the work you’ve done for a client. Sadly this is a common occurrence experienced by some small businesses and micro-businesses today – and one I’ve experienced running my boutique public relations firm during the Covid pandemic. All too often I experienced the mixed emotions of a new commission from a client followed by the dread of chasing payment for months after work had been completed. The good news is, the government seems to be doing something about it. And whileproposed new late payment lawshopes to tackle the problem, I share some of my tips for managing a small business the next time a client pays late. Impact of late paymentsLast year, the Department for Business and Trade and the Office of the Small Business Commissioner carried outresearch on the impact late paymentshad on small businesses. According to the research over 1. 5 million businesses are affected by late payments every year and are owed an estimated £26 billion in late payments at any given time which equates to, on average, £17,000 per business. So what can you do to prevent late payments as a business?Late payment checklistHave clear payment terms. Share your Ts&Cs with potential and existing clients so they have a clear framework from the start before the work is started. For example, please pay within 30-days. These Ts&Cs can be displayed on your professional website or on your business email account to stop any confusion. Introduce same-day payment. Most businesses request payment within 30-days but you can choose to request immediate payment once the work has been completed for your client. Ask for partial payment. This can be an initial payment if you like, anything from 10% or 25% and then ask for the remainder on completion. This will help to balancecash flow. Invest in the latest accounting tools. Xero, or QuickBooks have built-in tools for automating the invoicing process from scratch. These tools can send out and chase invoices for you so your clients get the message to pay on time. Have legal protection. Whether you’re an electrician, plumber, or journalist, it’s important to be part of your industry body. They often can offer free legal advice if unfortunately payments aren’t made on time. For example, as an electrician you’ll be part of the ECA (Electrical Contractors’ Association) or the NICEIC (National Inspection Council for Electrical Installation Contracting) and a journalist can join the NUJ (National Union of Journalists). What can you do to protect your business if late payments do happen?Read more:The 9 best self-employed accounting software – get MTD readyWhat can you do to protect your business if late payments do happen?If late payments occur make sure that you have a “buffer” for at least six months to pay bills and any staff. Try to build this up over time, whether that’s through smartbudgetingor creating savings pots and round-ups in yourbusiness bank account. Another security measure could be setting up an alternative income stream alongside your business. While this depends on whether you have the time available and the nature of your existing business, having another income source can take the pressure off when cash flow problems arise. Lots of businesses choose to expand their offerings to help “fill in the gaps”. Whether that’s expanding from dog walking into selling doggy treats, offering tutoring alongside your cupcake venture, or taking up a part-time job alongside freelance writing. Making smart finance decisions now can help you prevent cash flow problems later. Read more:How to increase your prices and communicate with your customersProtect your business with insuranceSimply Business lets you create a tailoredbusiness insurancepolicy. We cover over 1,700 trades, from online retailers to builders to freelancers. You can also choose add-ons likelegal expenses insurance, which can help to cover the costs of legal issues such as debt recovery. Get a quote online– it takes less than seven minutes. PromotionHow is the government helping small businesses?In November 2024, the government launched the FPC (Fair Payment Code) which rewards those who sign up with a gold, silver or bronze badge, according to the percentage of invoices they pay on time. Last July, it published theSmall Business Strategy and Late Payment Consultationviewed by many as the biggest attempt to crackdown on late payments for 25 years. And theCommercial Payments Billis currently going through the House of Lords. It will need to go through readings in the House of Commons before it gets Royal Assent (and becomes law). The Bill is proposed legislation designed to tackle late payments between businesses, especially when large companies delay payments to small suppliers. Late payments cost the UK economy around £11 billion a year and 14,000 businesses a year close due to late payments. Need a cash boost?Simply Business and serial entrepreneur Simon Squibb have teamed up to give away £1,000 a month for the rest of 2026. We know lack of funds and cash flow challenges can stop big dreams becoming a reality, so we hope to help in some small way with this cash boost. Win £1,000If you’re a small business owner or a sole trader then enter the prize draw for a chance to win £1,000. You just need to enter once and we’ll automatically add you to the list for each prize draw until the closing date. Terms and conditions apply. Simon Squibb, serial entrepreneur and author of ‘What’s your dream’ is giving away £1,000 to business owners in partnership with Simply BusinessKeep an eye on the Knowledge centre andsign up to the newsletterto stay ahead of small business news. More small business newsQuarterly tax reporting: practical ways to stay ahead of the new deadlinesHow to boost your sales for free with Google Universal CartIs Making Tax Digital replacing Self Assessment?Small businesses must adapt to change on the high street – here’s howThis content is for general, informational purposes only and is not intended to provide legal, tax, accounting, or financial advice. Please obtain expert advice from industry-specific professionals who may better understand your business’s needs. Read our full disclaimer