Creative agencies and freelancers are being stung by an average 27-day wait for settlement of overdue invoices, according to a new report.
The findings come from a survey of over 5000 invoices issued by organisations such as IT developers, digital marketing consultancies, design specialists, film, TV and photography contractors and more. The study, carried out by business lender MarketFinance, found that clients were routinely paying service providers and suppliers late despite already insisting on lengthy payment terms that averaged out at 45 days.
Overall, 44% of invoices Market Finance analysed from 2019 were paid late, a slight improvement on the 48% it found were settled beyond the agreed terms in 2018. But worryingly, the average length of time invoices were left overdue before being paid more than doubled from 13 days in 2018 to 27 days in 2019.
This means that a significant proportion of operators in the creative sector are having to wait 90 days or more to receive payment following the completion of work.
As MarketFinance point out, the UK creative industry is dominated by small companies, microbusinesses and freelance operators who can ill-afford to wait for up to a month after they were expecting payment. MarketFinance’s external relations director Bilal Mahmood said the impact on cash flow was undermining a vibrant sector of the UK economy, and called on the government to take more meaningful action.
“It’s unfair for businesses to have to wait to be paid beyond what is agreed. Late payment practices harm business cash flow, hamper investment and, in extreme cases, can risk business solvency.
“Government measures such as the Prompt Payment Code and Duty To Report have helped create awareness but need more bite. Until this happens, there are ways for SMEs to fight back against the negative impact of late payments, from having frank discussions with debtors that continuously fail to adhere to agreed payment terms, to imposing sanctions on those debtors, or seeking out invoice finance facilities to bridge the gap.”
These are sentiments we 100% agree with at Safe Collections. As the battle to end late payment culture goes on, the things small businesses and contractors can take care of themselves include getting their contracts right from the very start of a relationship with a client, which includes insisting on payment terms that work for your cash flow needs.
And if those terms are not met, then businesses should be prepared to make full use of the recovery options available to them, including adding late payment charges and interest, making use of a professional debt recovery agency and pursuing claims through the courts if necessary.