smallbusiness.co.uk: Helping your business think big

As of last week, large firms can claim interest on late payments due to a change in legislation. The British Chambers of Commerce (BCC) is concerned that this could create an "uneven playing field" between large and small firms.

This is partly due to small firms’ reluctance to claim the statutory late payments interest to which they have been entitled since 1998. The risk of losing customers appears to be outweighing the impact of late payments and, according to BCC Acting Head of Policy Sally Low, "poor cash flow is ultimately better than no cash flow" for a small business.

Interestingly, Low argues that legislation is not the only solution to late payment problems for small businesses. Better credit management policies and clearly drafted documentation that sets out payment terms and conditions could help in recovering bad debt without losing customers.

Small business group the Forum of Private Business (FPB) has produced a 77-page guide to coincide with the legislation change. The FPB Cash Flow Guide offers explanations of the late payments laws and advice on minimising the risks of extending commercial credit control procedures and operating a credit policy, which would reduce the need to apply the laws.

A basic rule to follow to avoid late payments problems is to check prospective customers through a credit reference agency. Getting a customer to sign and agree to clearly defined terms and conditions is described as "invaluable" by the guide, while keeping detailed documentation of transactions is also recommended.

The FPB Cash Flow Guideis available through the website at www.fpb.co.uk.

(12/8/02)