LATE PAYMENTS ARE ‘strangling’ small businesses, with companies waiting an average of 62 days to be paid, according to the Small Firms Association.
The SFA conducted a survey of its members which found more than two thirds of small businesses have experienced creditors being late with payments.
Eleven per cent of small businesses have used a debt collection agency to get money owed while just 8 per cent have included late payment charges to customers who are slow to pay.
“Getting paid on time is a never-ending problem for most small businesses,” said Patricia Callan of the Small Firms Association.
An EU directive introduced ten years ago means companies can automatically charge interest penalties on money outstanding after 30 days, but the survey found just 40 per cent of respondents were aware of the law and only 4 per cent of respondents had successfully used it.
Callan said that late payment causes cash flow problems, requires firms to extend its overdraft facilities or borrow money, and eats up a lot of management time. “This in turn affects the ability of the business to compete, be profitable and expand,” she said.
The SFA is calling for a Small Claims Court to be established for businesses to deal with slow payments.