smallbusiness.co.uk: Helping your business think big

Many UK firms are failing to take advantage of specific legislation which guards against late customer payment of debt, new research has found.

Despite all firms being allowed to claim statutory interest for missed due deadlines, thanks to the Late Payment of Commercial Debts (Interest) Act, research by credit agency Graydon UK found that just four per cent of UK businesses actually recouped these charges.

Though a further 44 per cent of business managers questioned in the poll stated that their firms sometimes added interest to late trade invoices, that left more than 50 per cent of firms who never claimed interest payments that was legally theirs.

'The late payment culture in this country, particularly amongst large corporates who use their financial muscle to delay payments to suppliers, won't go away in the foreseeable future, but there is an awful lot smaller companies can do to protect their cash flow in the meantime,' says Martin Williams, Graydon managing director.

'Doing credit checks, chasing payments by telephone rather than by letter and ensuring that the client has received the right service prior to a due payment date are all useful tips, but ensuring that your payment terms and conditions include your right to charge interest on late payments, and that these terms are agreed upfront by clients, will empower you still further.'

In the survey, the primary reason for firms not claiming late-payment charges was that it was not 'customary in their industry' to do so, while a further 25 per cent of businesses questioned were worried about the extra administrative requirements that such claims might take up. Just 16 per cent of respondents said that the fear of upsetting or losing customers prevented them claiming interest.

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