The amount owed to small businesses is now at its highest level in five years, according to BACS, which runs Direct Debit.
£35.3 billion is owed to small businesses in unpaid invoices, with bigger companies shown to be the worst offenders when it comes to paying on time. BACS said the average owed to small businesses at the end of 2011 was £45,000, up from £39,000 earlier in the year.
They also found that the average company is waiting 29.5 days longer than agreed to have their invoices paid.
Alistair Gregory, associate solicitor at Stephensons Solicitors LLP, acts for businesses who are suffering cash flow problems as a result of late payments. He said: “The figures from BACS also show that 41 per cent of small businesses believe larger companies are the worst offenders when it comes to late payment.
“This is symptomatic of our experience and in fact many small firms lack the resources to be able to cope with such blatant abuse of the customer/supplier relationship. Ultimately, larger firms who fail to pay invoices within agreed terms are using their suppliers as an unofficial source of interest free credit.
“However, there are ways for smaller businesses to fight back and regain control of their cash flow by taking legal action to swiftly recover their debts.”
Stephensons’ Debt Recovery team recommends sending a Letter Before Action to the late payer, which gives them seven days to settle the invoice before further legal action is implemented.
Stephensons can issue a letter before action for just £10. If this does not encourage a debtor to pay their bill, a solicitor can issue a claim with the County Court or the High Court, to which the debtor then has 14 days to respond. If they do not, a solicitor can automatically enter a default judgment, known as a CCJ. This will affect the debtor’s credit rating if they fail to pay within one month and enforcement proceedings can then be started at any time after this.
ENDS
About Stephensons:
The latest edition of the Legal 500 recommends Stephensons’ Commercial Litigation team. The firm has 30 partners and more than 350 staff in eight regional offices across Greater Manchester, Cheshire and Merseyside.
Media information: Lianne Tracey
Stephensons Solicitors LLP
T: 01616 966 229
E: lianne.tracey@stephensons.co.uk