New research has revealed that recruitment agencies are owed over £6bn in late payments from their clients.

Sonovate, who carried out the research, found that the average start-up created after 2013 has built up over £50,000 worth of debt from clients unwilling to pay.

Unsurprisingly, these problems can be devastating for companies. Any business whose cashflow is interrupted in this way will find growth and future planning difficult and run the risk of closing all together.

Newer businesses aren’t the only ones feeling the pain. Recruitment agencies who were founded in 2008 are owed a staggering £193,000 on average.

While these issues negatively affect any business, recruitment companies are hit harder. Thanks to the pressure of paying their contractors quickly, sometimes between 5 and 10 days of their timesheets being okayed, late payments mean agencies have to break into their own capital to cover the costs.

This news comes as business confidence dropped for the first time in two years thanks to fears of a skills shortage. With fewer workers to put on the books and the chance of increased wages, unpaid invoices could become a more acute problem for recruiters over the next few years.

This is hardly an issue only affecting recruitment agencies though. At the end of 2013, over £30bn was owed in late payments with 85% of small businesses having faced the problem.

Image by Victor Casale

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