Small firms have been advised to ‘get tough’ on late paying customers amidst recent interest rate rises.
Law firm Maces & Jones said smaller businesses needed to ensure their credit checking procedures are ‘robust at a time when cash is tight’.
“The scourge of late payment already contributes to the death of an estimated 10,000 – 15,000 firms each year with small firms owed an estimated £50bn a month,” said Duncan McAllister.
“Late payment should not be tolerated and can be tackled with an effective credit control system. Too many businesses are paying late to sustain their own cash flow and undermining their suppliers in the process. We advise businesses large and small to get tough on this practice.
“That means thorough management including credit checks on new customers and even existing customers, offering incentives such as discounts for prompt payment and making customers aware of their obligation to pay with prompt invoices.”
McAllister also urged small companies to make sure they are aware of their legal entitlements under the Late Payments of Commercial Debts Act.
The Act allows small firms to claim interest on overdue payments from other companies. Firms are entitled to claim 8% above the Bank of England base rate on any payment not received within 30 days of invoicing.
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