Suppliers reluctant to act on late payments
Suppliers are waiting more than 3 months on average before threatening legal action over late payment, according to new figures.
Research by commercial debt recovery firm Lovetts shows that businesses are reluctant to take action against late-paying customers. During the first quarter of 2015, businesses have waited for an average 103 days from the invoice date before attempting debt recovery. This is a 24% increase from Q1 2014 when the average time was 83 days.
The findings come after prominent industry bodies launched campaigns to crackdown on the culture of late payment.
A survey by the Forum of Private Business (FPB) found that 51% of small businesses have experienced problems with late payment and 46% feel unable to negotiate better supplier terms.
Nigel Holland from Holland & Co Chartered Accountants said:
“The reason why firms are reluctant to take legal action when payments are late is because they do not want to damage the relationship which exists with their customers. There has been high profile campaigns in the past to stamp out the problem however there is a lack of confidence in the Prompt Payment Code.
A separate survey by the Federation of Small Businesses (FSB) revealed a severe lack of confidence in the Prompt Payment Code. Just 21% of surveyed FSB members believe the code will solve the problems of late payment.
The business environment has improved recently and it is important that firms have a robust credit control procedure in place so that their business is not damaged by late payments.
It is important that the Government act on this problem now and I am in favour of calls for an independent inquiry being started to improve payment practices.
At my firm we pay invoices as soon as we receive them because this way we are able to develop a good business relationship with our suppliers.”
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