28th August 2008
Small businesses are suffering due to an increase in late payments, according to research by the Forum of Private Business (FPB).
The survey suggested that 88% of firms are victims of their larger customers failing to pay them within contractually-agreed periods, while 56% said it had become worse over the last year.
Most (72%) believe this is having a significant impact on their business, with almost a third of businesses reporting that they are owed between £1,001 and £5,000.
Currently, small businesses have a statutory right to interest (SRI) under the Late Payment of Commercial Debts (Interest) Act 1998 allowing them to charge interest on the debt they are owed.
However, the FPB says only a minority of businesses take advantage of this.
"The research shows that worrying trends are emerging," commented finance and administration director Nick Palin.
"Supplier abuse appears to be widespread, and many smaller firms are in a catch-22 situation, fearing that, if they take action and use the legislation to charge interest, these larger companies will simply refuse to deal with them again."
In January this year, a study by banks transfer organisation Bacs claimed that the amount owed to small and medium enterprises in late payments had risen to £18.6 billion.
And in a separate study published this week, Bacs said that 30% of SMEs have seen late payments worsen in recent months.
However, Bacs found the main culprits to be individuals (reported by 44% of those polled) and other SMEs (41%). Only 34% of respondents blamed larger companies for failing to pay on time.
Late payments worsening for small firms
The survey suggested that 88% of firms are victims of their larger customers failing to pay them within contractually-agreed periods, while 56% said it had become worse over the last year.
Most (72%) believe this is having a significant impact on their business, with almost a third of businesses reporting that they are owed between £1,001 and £5,000.
Currently, small businesses have a statutory right to interest (SRI) under the Late Payment of Commercial Debts (Interest) Act 1998 allowing them to charge interest on the debt they are owed.
However, the FPB says only a minority of businesses take advantage of this.
"The research shows that worrying trends are emerging," commented finance and administration director Nick Palin.
"Supplier abuse appears to be widespread, and many smaller firms are in a catch-22 situation, fearing that, if they take action and use the legislation to charge interest, these larger companies will simply refuse to deal with them again."
In January this year, a study by banks transfer organisation Bacs claimed that the amount owed to small and medium enterprises in late payments had risen to £18.6 billion.
And in a separate study published this week, Bacs said that 30% of SMEs have seen late payments worsen in recent months.
However, Bacs found the main culprits to be individuals (reported by 44% of those polled) and other SMEs (41%). Only 34% of respondents blamed larger companies for failing to pay on time.
Tags: Regulations
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