Bacs research shows British businesses are not taking advantage of late payment legislation
A staggering 83 per cent of small-to-medium sized enterprises (SMEs) in Britain are not exercising their right to charge interest on late payments owed to them by other organisations – despite the fact that legislation to this effect was introduced almost a decade ago.
This figure, revealed as part of ongoing research from Bacs Payment Schemes Limited (Bacs) – the organisation behind Bacs Direct Credit and Direct Debit – highlights the ongoing battle SMEs face in clawing back the estimated £18.6 billion that is collectively owed to them in outstanding payments.
Initially launched on 1 November 1998, the Late Payment of Commercial Debts (Interest) Act was introduced to offer SMEs protection against late payments by providing them with the statutory right to charge interest on overdue invoices.
However, when questioned as part of Bacs’ annual business omnibus, just 15% of SMEs confirmed they had utilised their legal rights and charged interest on an overdue business payment. In the regions, Bacs figures revealed SMEs in the South East are least likely to charge late payers, with a massive 92% stating they had never added interest to an overdue invoice. In contrast, SMEs in the South West are leading the offensive with a greater proportion of SMEs in the region (29%) confirming they had successfully charged interest.
Commenting Michael Chambers, managing director of Bacs said: “These figures are surprising considering the scale of late payment problems in Britain. Research conducted by Bacs at the end of 2007 showed a typical SME is now owed an average of £30,000 at any one time. Looking at this figure and other facts at hand, it’s high time businesses started to tackle this problem head on. SMEs shouldn’t just sit there and expect to be paid on time. They should encourage suppliers to pay their invoices automatically using Bacs Direct Credit, quote ‘Pay me Direct’ on all their invoices and make a polite phone call in advance of invoice due dates to pre-empt payment. If, after all these steps have been followed, companies still fail to meet agreed payment conditions then SMEs should take advantage of the full legal rights they have been given and start charging interest on overdue payments.”
For further information about Bacs Payment Schemes Limited, Direct Debit or Bacs Direct Credit, please contact the Bacs press office on 0845 680 1368 or email@example.com.