More firms head for court over bills

5 February 2004
More legal news

05 February 2004 | Robin Parker

Small businesses are increasingly likely to take legal action against firms that delay paying their bills, new research suggests.

In a study of 1,000 small and medium-sized enterprises, 43 per cent of owner-managers had taken legal action against a customer for non-payment of invoices.

More than a fifth of those surveyed said they frequently suffered from restricted cash flow caused by late payment.

Despite the introduction in 2000 of legislation to curb the practice, delayed payments still contribute to the failure of 10,000 UK businesses a year, according to Bank of Scotland, which commissioned the study.

The report found that small firms wait on average 40 days before their bills are paid, and one in eight waits between 61 and 90 days. The recommended payment window is 30 days.

Half of firms have waited up to a year for payment at one time, and a quarter have waited for more than two years.

The bank will examine the extent of legal action over bills in its next quarterly SME Economic Survey, a wider-ranging analysis of small business attitudes and behaviour, due in March.

A Bank of Scotland spokesman said late payment, while slightly down in the past year, is still a frustrating part of life for SMEs.

"But it is, perhaps, surprising that so many small businesses have felt they had no alternative but to take legal action," he said.

"The figures would be higher if it were not for the fact that many owner-managers would view levying a late payment charge on a client as commercial suicide."


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