Late payment – the mental health and financial impacts on small business owners

The financial impact on small business owners of dealing with late payment is often talked about. However, new research has found that more than two fifths of small business owners say it has also affected their mental health.


Around 37% of entrepreneurs have considered giving up their businesses entirely because of cash flow issues over the last 12 months, according to the report by Xero and PayPal.

The impact of late payment on mental health

Gary Turner, co-founder and managing director at Xero, said

“Late payments don’t just damage business finances and relationships; they can compromise personal finances and relationships. Our research illustrates how getting paid on time can have a dramatic effect on a small business owner’s happiness. When they struggle, the whole of the UK struggles.”

The survey questioned business owners about how they would feel if cash flow was no longer an issue. 

More than three quarters said having a business would feel more ‘worth it’, and 73% would feel more optimistic about their business. Another 26% believe they would enjoy better physical health.

On average, 48% of invoices issued by small businesses are paid late each month. This leaves 26% of company owners struggling to pay their own suppliers on time. 


Big companies hit with financial penalties

The government announced in June it is considering new proposals that would see big companies hit with financial penalties for not paying smaller suppliers on time.

Audit committees would be forced to disclose their payment practices in company annual reports.