A leading business group is calling for the UK’s largest businesses to pay their smaller suppliers on time.
The Forum of Private Business says larger businesses should lead the way when it comes to paying on time, as set out in the terms and conditions set at the start of their contracts, and without changing payment times later on.
The FPB is supporting the ‘Be Fair – Pay on Time’ campaign led by MP Debbie Abrahams to highlight how much of a problem late payment is for small businesses, who in some cases are waiting up to three months for payments.
In recession, payment of invoices on time can really help small businesses to stay afloat yet only 25% of the FTSE 100 companies have signed up to the voluntary Prompt Payment Code (PPC).
The FPB's CEO Phil Orford said: "The Prompt Payment Code is something all large firms could and should subscribe to. It asks nothing more from responsible businesses than to pay suppliers as and when agreed, without changing terms and conditions retrospectively."
There does appear to be a growing culture of stringing out payments terms, with some companies not paying at all.
A lot of businesses may not be aware that they can actually impose ten per cent statutory interest on unpaid and overdue bills, and claim compensation. However some small companies may be put off taking this approach for fear of losing out on future contracts by actively reclaiming their debts.
But as the double dip recession claims more small businesses, it’s essential to take a more proactive approach to debt recovery. Where once a business may have borrowed to maintain a healthy cash flow, access to funds is now much leaner and some businesses are going bust.
Sending a letter before action, which gives the debtor seven days to pay before legal action is taken prompts the majority of late payers to part with their cash.
By debt recovery solicitor, Alistair Gregory