Late Payment is a top concern for small businesses

According to research from the Federation of Small Business (FSB), the time spent chasing late payment, and the effects of dealing with bad debt, are costing UK small and medium sized businesses an estimated 286 million man hours and nearly £3.6bn per year.

A recent study by the Institute of Directors (IoD) highlighted late payment as the greatest concern for small businesses, ahead of lack of finance and business rates.

There are several measures that can protect a business that include clearly stating the payment terms in the terms and conditions at the beginning of a business relationship.  In addition a business can consider requesting some monies on account and bill the client on a monthly or regular basis rather than issuing one final bill.  In both cases they rely on clear drafting of contracts and terms to ensure there is a safety net should things go wrong.

There is legislation to protect small businesses against late payment by larger businesses through the Late Payment of Commercial Debts (Interest) Act that has been in force for five years.  This enables a business to charge interest on the debts however it this is not seen as conducive with maintaining good business relationships for the future.

If a bill remains unpaid there is often no alternative but to seeking payment through the Courts.  In extreme but not uncommon situations a business can fail because of this problem.

If you would like to discuss how to protect your business please contact Alistair Latham.

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