CMRC reasearch shows firms are using threat of interest to help combat late payment.
Businesses are embracing the late payment legislation by warning customers in advance that interest will be charged if they fail to pay on time, according to research to be published at the end of this month by Better Payment Practice Group member, the Credit Management Research Centre (CMRC).

The CMRC's latest industry report, Credit Strategy and Corporate Performance, revealed that 80% of firms are aware of the Late Payment of Commercial Debts (Interest) Act and 38% make their customers aware of their intention to claim interest in the event of late payment, by incorporating it into their terms and conditions. The survey of 700 businesses of all sizes also revealed that 36% of participants admit that the threat of interest would make them pay more promptly.

Professor Nick Wilson at the CMRC commented: “Late payment is still an issue in this country – UK businesses are owed £24bn in outstanding invoices at any one point in time. What should be remembered, however, is that the legislation alone cannot be expected to improve this situation.”

Richard Wilson, Chairman of the BPPG continued, “The legislation was never meant to be a silver bullet. Businesses need to take a responsible attitude to credit management, to prevent late payment occurring in the first place – this means implementing a well planned credit management and collection strategy. The CMRC’s research is encouraging, as it shows that a substantial number of businesses are beginning to recognise how the legislation can work as part of a wider strategy to deter late payment.”

The legislation entitles businesses to claim interest on overdue debts at a current rate of 11.75%, although this rate will increase to 12.5% with effect from 1st July 2004. Further information is available in a downloadable guide in PDF format by clicking here.

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