Survey reveals impact of late payment legislation

A survey of more than 1200 UK SMEs has revealed that awareness of the UK Late Payment Legislation is as high as 60%. Furthermore, the possibility of incurring statutory interest charges on unpaid invoices would prompt the majority to pay their suppliers on time.

According to the Omnibus Survey, carried out by the Department of Trade and Industry, 64% of SMEs say they would pay their suppliers’ invoices more promptly if they knew that the failure to do so would result in interest charges under the Late Payment Legislation.

The survey indicates that just over a third of UK SMEs are experiencing difficulties with late payers and 10% deem it a big problem. Yet there is evidence to suggest that the majority of SMEs are taking appropriate steps to deal with this problem, with 71% of SMEs agreeing written terms and conditions with their customers, and establishing the credit period in advance.

Clive Lewis, Head of the SME Unit at ICAEW and member of the Better Payment Practice Group commented, “These figures suggest that there is real scope for the Late Payment Legislation to have a positive impact on payment performance in the UK. Businesses should not be afraid to invoke their right to interest, particularly now that the late payment legislation has been enhanced to allow creditors the right to compensation for debt recovery costs as well.

“It is vital to bear in mind, however, that the legislation will not be enough on its own to tackle the problem of late payment. Businesses need to incorporate the legislation into an effective credit management policy, and I am delighted that SMEs appear to be taking this issue seriously.”

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