Small firms are continuing to suffer long waits for payment owed to them by clients and customers, despite government measures aimed at combating the problem, according to new research.

A survey by the Bank of Scotland (BoS) found that two-thirds of small businesses regularly suffer cashflow problems because of late payment, with the average firm waiting 40 days before invoices are settled.

The research revealed that one in eight companies wait between 61 and 90 days for payment, while nearly a quarter of those polled have had to wait over two years for clients to stump up in the past.

Late payment, which is blamed for the demise of a massive 10,000 firms a year, remains a severe problem for many businesses, despite government legislation designed at cracking down on bad debtors.

Last year, ministers gave companies the ability to take late payers to court and claim compensation, but the measures appear to have done little to solve the problem, which many businesses admit has become normal practice.

The BoS survey revealed that the manufacturing industry was the sector most affected by late payment, with 21 per cent of businesses waiting over 60 days for money owed to them. The leisure industry was the least affected sector, with just nine per cent waiting over 60 days.

Businesses in Scotland and Wales suffered most from late payment, while firms based in Yorkshire and Newcastle had least problems with tardy clients and customers.

Eddie Morrison, of BoS, said: “The research suggests that many small businesses are suffering from the impact of late payments on their business cashflow.

“Despite legislation to address this issue, many owner-managers would view levying a late payment charge on a client as commercial suicide.”

BoS offered the following advice to entrepreneurs suffering at the hands of late payers:

  • Always examine a company’s credit history before dealing with them.
  • Chase up any payment as soon as the first payment becomes overdue.
  • Consider employing a professional credit controller as a mean of reducing overdue debt.
  • Look into factoring or invoice discounting as ways of preventing late payment from destabilising the company.
  • Charge interest on overdue payments as a last resort.