Business - Late payment hits small companies
Small businesses have the worst record for late payment of bills, according to a new survey.
The quarterly research, by Leeds University Business School for the Institute of Credit Management, surveyed 200 businesses of all sizes across a range of industry sectors.
Looking at late payment of bills according to the size of customer, 35% of those surveyed said small businesses – 50 employees or fewer – were cited as the most common late-payers, followed by very large businesses – 500-plus employees – at 32%. The report also found that, on average, it takes smaller businesses 57 days to receive money owed, compared to 53 for medium-sized firms and 43 for large companies.
The Late Payment of Commercial Debts Act, due to become law in the autumn, will allow companies to charge 8% interest on bills not paid in the contractually agreed time, and will benefit small companies first. For the first two years, only small companies will be able to charge interest on overdue bills.
ICM director general Peter Rowe said: ‘Some small businesses might find the right to charge interest on late bills is a double-edged sword.’