Late payment dispute is ruining my health and crucifying cash flow
What happens to a small business owner when a big client refuses to pay their bills? Here, one describes the anxiety it’s causing during her pregnancy.
I’m the owner of a small digital marketing agency that has been trading for almost two years. My business ran into extreme difficulties earlier this year because of a problem with our biggest client, a large fashion brand that represented approximately one-fifth of our annual income. The difficulties took us by surprise. We had been working with this client for a year and had received glowing feedback, having managed to double the revenue generated by the marketing channels we manage for them.
The problems began when an invoice we issued a few months ago was not paid on time. This wasn’t unusual as the client had occasionally paid a few days late. However, after a week, I started to become concerned. I began phoning and emailing, but received no response. It became apparent that a number of our usual contacts had left the business suddenly – we weren’t informed of this before they left.
After the invoice was more than two weeks overdue – six weeks after the initial bill was sent – I received an email asking for every minute detail relating to it. The client disputed whether we had done some of the work we had billed them for, even though that work had been signed off months before. After much back and forth, we received a payment of less than £500 against the company’s five-figure outstanding debt. We tried to resolve the issue over email, but it became clear that we were getting nowhere and eventually all correspondence from their end dried up. I felt I had no choice but to hire lawyers to handle the problem.
Now it’s around two months since these problems began and we still haven’t received payment. To take this to court is going to cost my company thousands of pounds. But more pressing is the time it will take, during which I need to pay my staff and meet my company’s financial commitments to keep us afloat. This is crucifying the company’s cash flow. I am unable to take a salary while all of this is happening. On top of which I’m pregnant, and my baby is due soon.
In the past few months, the client’s deliberate and persistent intimidation – most recently, they threatened to sue me for breach of contract for not providing service since this dispute began, service we are contractually obliged not to provide while their invoices remain unpaid – has begun to have a detrimental impact on my health. I’ve been experiencing symptoms of stress and anxiety, including insomnia. Such was the stress that my GP found my blood pressure had risen and he was concerned that I might develop pre-eclampsia.
Meanwhile, I’ve had to significantly extend the business’ overdraft to pay tax bills and our staff. To put it into context, last year this client turned over what they now owe us in a single day of trade.
Even though all of our clients get a 30 days’ payment term in their contracts, they can’t seem to pay on time. The bigger the client, the worse the problem, and the more leniency they expect. It could be months before this dispute goes to court.
In general, large businesses are known to complain about late payment penalties during contract negotiation, explaining that they might not pay on time. I believe something has shifted to make them think this is a totally acceptable way to behave. It’s a culture that urgently needs to change.
Bigger companies benefit from working with smaller organisations like mine – for example, I think we give large clients more care and attention than a big agency would give them as they are so important to our business success.
At the moment, the government is not helping small businesses like mine. It should be illegal to pay small businesses late and company directors should be held accountable.
I believe standardising SME payment terms is critical because it’s difficult, and sometimes draining, to go through contract negotiations with a much bigger organisation and hold your ground. There needs to be more measures in place to help small businesses avoid situations that jeopardise their future and enable them to defend themselves against unfair practices.
I know the government plans to bring in a small business commissioner, as part of the Enterprise Bill
Source: The Guardian