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East Midlands Chamber News

Businesses' understanding of credit management growing

Since the introduction of the directive in 1998, small businesses have had the right to claim interest from large firms and the public sector on overdue invoices. In November 2000, this was extended to include charging other small firms.In 2005, the amount small businesses can charge for late payments increased from 12.5 per cent to 12.75 per cent. According to research from the Small Business Service, small firms are owed £17bn in outstanding invoices at any one time.BPPG member, the Institute of Chartered Accounts for England and Wales (ICAEW), believes small firms are taking credit management more seriously and says late payments seem to be reducing."It is imperative that small firms take credit references and agree terms and conditions with their customers early on," said ICAEW spokesman Clive Lewis. "The late payment legislation is a good deterrent, but it should be used as a last resort."Small businesses appear to be heeding this message, as according to the BPPG, 77 per cent of firms check the credit worthiness of customers before granting them credit.In addition, 70 per cent of companies send invoices within three days after dispatching goods and services, while 52 per cent of businesses have a written credit policy - up from 35 per cent a decade ago."Businesses are proactively taking steps to minimise late payments, understand their rights and are confidently using the tools at their disposal to ensure they are paid on time," BPPG chairman Richard Wilson said."If every business in the UK undertook the basic steps of checking the credit worthiness of potential customers before granting credit, issuing a written credit policy and implementing confident and timely collection procedures, we would see a wholesale change to the payment culture."

  • For more information on late payments visit www.payontime.co.uk

(c) Business Hotline Publications Ltd 2005