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Late payment has become a badge of honour for British businesses who are failing to see the knock-on effects that stalling payments can have for the entire economy. According to Charles Wilson, CEO of commercial debt recovery law firm Lovetts, in Q2 2012 the average value of debts passed to a company by its clients increased by more than 38% on the previous quarter. The news follows recent analysis by BACs which found that SMEs in the UK are owed £35.5bn, an increase of £2bn compared to the end of 2011. Lovetts’ analysis also found that while the number of individual debts being chased by legal claim has dropped, the average value of those debts has increased – by more than 11% on the quarter, and almost 24% year-on-year. Lovetts believe that this demonstrates an encouraging longer-term trend, with businesses treating larger debts as a serious threat and being prepared to pursue the perpetrators through the legal system. Charles said: “At the start of any new commercial relationship, it is vital to make absolutely clear that you expect clients to pay on time. State your terms and conditions clearly, including details on how any overdue payments will be dealt with. Companies should use a late payment demand from a solicitor to send a strong message of their intention to punish late payment. “Too many businesses still shy away from taking advantage of the Late Payments of Commercial Debts (Interest) Act 1998, despite being well within their rights to do so. In many cases this is because firms are simply failing to state that the full cost of any debt recovery activity necessary to secure overdue payments will be added to the invoice. This should be stated in the terms of business at the start of any relationship. Get the terms and conditions right, and businesses stand a fighting chance in the late payment battle.” Other Business Money News
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