Small businesses should remember that they have the power to keep control of late payment.
Late payment can be a nightmare for small businesses, but they should remember that they have the power to take control.
An increasing number of small and medium-sized businesses (SMEs) are facing cash flow crises, according to a survey carried out by find-a-solicitor service Contact Law, with two thirds (65 per cent) of debt recovery specialists noticing a substantial rise in the number of SMEs chasing large debts over the past 12 months.
What many small businesses don’t realise is that late payment compensation can be claimed for any invoice that is not paid within the credit period, even if it has now been paid. Businesses have up to six years to claim the compensation, which amounts to £40 for debts of under £1,000, £70 for debts between £1,000 and £10,000, and £100 if the amount owed is £10,000 or more.
What’s more, businesses are within their rights to charge late payment interest, the rate of which is 8 per cent above the Bank of England base rate, and is set at the end of the preceding June and December.
Of course it’s easier said than done. Enforcing such terms on your customer could very easily lead to you losing much-needed business. But it's good to know that if cash flow problems get too hairy, at least the option is there.
What can the government do about the late payment issue? Well, don't hold your breath on any government miracles, but it can probably do more than it has been. Last year, the Cabinet Office vowed to ‘name and shame’ late payers, with minister Francis Maude insisting he will be keeping a close eye on how the big suppliers choose to pay their sub-contractors, and that the Office ‘won’t shy away from naming and shaming those that we find have failed to pay promptly’. Little that has come of this posturing, however.
The body of evidence suggests that the late payment problem is indeed getting worse, and maybe it will take a few brave small business mavericks to stand up to their customers and charge interest for the problem to ease a little.
See also: Late payment claims brought forward