Strong Support For Late Payment Legislation
-Twice as many small firms are using the Late Payment Act-

Current research by the Credit Management Research Centre (CMRC) at the University of Leeds, shows that the number of small businesses that have taken advantage of the Late Payment of Commercial Debts (Interest) Act 1998 has doubled, with one in ten firms saying that they have used it to claim interest on late paid debts, compared to one in twenty polled a year earlier.

The survey suggests widespread knowledge of the first phase of the legislation, with 93 per cent of firms being aware of the legislation and their right to claim interest from larger businesses and the public sector organisations that pay late.

It is particularly encouraging that more than one in three (34%) firms are using the legislation as a deterrent by informing debtors that they charge interest as part of their standard collection processes. Of the percentage that use the legislation in this way, more than one in two firms (52%) make customers aware of the potential amount of interest charges.

"There is clearly a growing trend amongst small businesses to take advantage of the legislation as a useful credit management tool," comments Professor Nick Wilson, head of the CMRC and the latest member of the Better Payment Practice Group (BPPG). "Rather than being used as a last resort measure when an invoice is late, the true value of the legislation is its ability to give ‘extra bite’ to collection procedures."

The survey also examined attitudes regarding the impact of the legislation. Although only 4 per cent of respondents indicate that they had seen an improvement in payment times since the legislation was introduced, more than one in five (22%) believe that the legislation will have an ‘advantageous’ effect in the long term.

Comments Professor Wilson: "There’s no universal or immediate panacea to the problem of late payment but there is evidence that some small businesses have found the legislation useful and regard it as contributing to a longer term culture change."

Further information about the CMRC’s activities and the research undertaken can be found at www.cmrc.co.uk.

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