19 December 2008 | Jake Kanter
Small suppliers are increasingly taking legal action over unpaid bills, according to new data.
Research by the Credit Management Research Centre (CMRC) revealed the number of county court judgments against firms for unpaid debts in the UK has steadily increased over the past year. There were 7,663 in November this year, compared with 5,459 in November 2007.
Professor Nick Wilson, director of the CMRC, said the current economic climate means small businesses need prompt and consistent payment, or they risk going bust. He urged buyers and vendors to agree billing structures in advance of supply to ensure there is no excuse for late payment.
"The situation is going to get considerably worse next year. Unless payment processes improve, small companies will get wiped out by a lack of cash," he said.
Fiona Ghosh, partner at law firm Eversheds, has also noted a rise in suppliers taking legal action to secure payment.
She said small vendors operate "hand to mouth" and their willingness to go to court suggests that bills are being withheld longer than usual.
CMRC figures showed some UK businesses are delaying bills by more than 90 days. According to its league tables on the best and worst payers in the FTSE 250, the slowest to settle bills was Scottish oil and gas firm Melrose Resources, which averaged 153 days.
Diane Fraser, group financial controller for Melrose, said the figures did not accurately reflect the company's payment terms.
The fastest payer was and asset management group Franklin Templeton Investments, at one day.