The hidden cost of late payments - and the best way to safeguard your business

Written by Adler Fairways

In the current economic climate, many UK businesses are confronting growing financial pressures from multiple directions, including delayed payments, stretched payment terms and signs of financial strain among trading partners.

Recent research shows that late payments remain widespread: 90 per cent of UK companies experienced late payments in the past year, and 44 per cent reported that these delays have become more frequent than before.

At the same time, broader research indicates that late payments cost the UK economy nearly £11 billion annually and contribute to the closure of thousands of businesses each year with Allianz Trade expecting insolvencies to remain at elevated levels well into 2027.

The hidden costs of customer non‑payment

Late payments and customer defaults aren’t just an administrative headache, they directly hit cash flow. If a major client fails to pay on time, or at all, the knock‑on effects can include:

• Reduced liquidity - tying up working capital that could be deployed elsewhere
• Increased financing costs - if you need to borrow to cover shortfalls
• Strained supplier relationships - where you’re unable to settle your own obligations.

In an era where thousands of UK firms are flagged as financially fragile, these risks are material for companies of all sizes.

What can be done to protect your business?

Trade Credit Insurance helps manage these risks by transferring the financial loss associated with customer non‑payment to an insurer in exchange for a premium. Its core functions include:

1 Loss protection

If a customer defaults due to insolvency or prolonged non‑payment, credit insurance can cover a large portion of the uncollected receivables, reducing the direct impact on your bottom line.

2 Cash‑flow stability

By securing receivables, you can preserve working capital and liquidity, even when markets soften or payment cycles stretch longer. This can be especially valuable in sectors experiencing volatility or where payment delays are widespread.

3 Risk‑informed decision‑making

Insurers typically offer credit insights and risk assessments, helping you judge the financial health of potential and existing customers. This data can inform which terms you offer and which customers you choose to trade with, so you’re not exposed unnecessarily.

This type of insurance has become increasingly relevant in the context of slower global trade and tighter business finances. UK firms are reporting a mix of higher non‑payment expectations and significant late payment behaviour, which together signal that cash flow risk is acute.

However, businesses that proactively manage these risks are better positioned to protect profitability and support strategic growth, even when economic conditions are unpredictable.

With non-payment risk rising and payment delays becoming more common, it’s important to take steps to protect your business. Trade Credit Insurance can offer you a practical way to safeguard cash flow and support more resilient financial planning.

As a patron of the Greater Birmingham Chamber of Commerce, Adler Fairways can provide you with guidance and advice on how Trade Credit Insurance could support your business.  Have a chat us today.