Debts law fails to make businesses pay up faster

4 March 2004
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04 March 2004 | Simon Binns

Legislation to make companies pay bills on time has been branded "a failure" by a new report.

A study of 30,000 companies by business information group Experian found firms are waiting longer to be paid than when the Late Payment of Commercial Debts (Interest) Act was introduced in 1998.

Companies now wait an average of 58 days to settle invoices, compared with 57.5 days in 1998.

A spokesman for the Department of Trade and Industry said: "It is disappointing that these figures demonstrate that we haven't quite turned the corner yet, but we expect that legislation will show a much more positive impact over the longer term.

"What the act offers is a legal recourse to charge interest on late payments, an opportunity that companies never had before."

He added that many suppliers request information from Companies House concerning payment patterns of their clients or potential clients.

But the DTI does not have the resources to act as a watchdog on late payment.

"Small businesses may have to be more diligent, but the issue is really about building good business relationships," he said.

Richard Champion, director of European purchasing at consumer goods maker Kimberly-Clark, told SM that purchasing staff have found themselves in the firing line, as they are often wrongly thought to be responsible for settling invoices, rather than accounts departments.

"It is our policy to pay our suppliers on time, but certain things can affect payment times, such as technical problems when integrating new IT systems," he said.

Clive Lewis, chairman of the Better Payment Practice Group, said: "The late payment legislation was never designed to create change in isolation.

"Small firms need to be diligent in practising good credit management and large firms need to appreciate the benefits of a prompt payment policy."


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