Small businesses fighting back against late payments

The FSB has revealed that small firms are taking increasing legal action against larger firms, in order to claim late payments.

Research by the Federation of Small Businesses shows that small firms are waiting up to 105 days to receive payments from larger companies.

Although the small firms are able to enforce payments under the Late Payment of Commercial Debts (Interest) Act, some are reluctant fearing relationships with the larger firms could be damaged.

Waiting significant lengths of time for payments is having a damaging effect of small firms’ cashflow. However, according to Susan Bateson, debt recovery manager at Stephensons solicitors, small firms are becoming more assertive.

“We are seeing a fightback by businesses who simply cannot afford to wait any longer for their cash. There is not much to gain from doing business when profit is eaten away by late payment."

She continued: "In our experience, 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.”

"The impact of the credit crunch is being felt by all, and it’s even more chronic for small firms, who need their cash flow to run smoothly in order to survive in this tougher climate.”

"Large companies have a moral duty to their smaller counterparts to behave responsibly."

Related article: Beat the credit crunch: survival tips for small businesses
Related link: Federation of Small Businesses

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