Legal Questions and Answers by
Jonathan Stones of John Barkers
Question :-
Despite Government claims that they would help small firms by changing
the appalling late payment culture in this country, it is clear that their efforts so far
have been completely unsuccessful.
You may have seen a recent survey by one of the major banks which showed that legislation
has had almost no impact on the problem and that the major source of the cashflow problems
facing small firms remains late payment.
Is it not time for firmer action?
Answer :-
I did see a report on the survey in the Business Telegraph and it makes
interesting reading.
Significantly whilst only two per cent of the firms surveyed had actually used the
legislation - The Late Payment of Commercial Debts (Interest) Act 1998 - to seek interest
on overdue money, 84 % of those surveyed were aware of the law.
So that means that almost everyone knows they can take action but almost no-one is doing
so.
Late payment is a difficult problem and I suspect that it is not going to be much of a
surprise to anyone that the law is little used. Small businesses don’t wish to
alienate large customers, so they’re reluctant to press them - let alone going so far
as to use the law to charge interest.
If small companies are not going to use the law that has been introduced for their
benefit, there doesn’t seem to be a lot of point in the Government passing even more
legislation on the subject.
Late payment has been deeply entrenched in the commercial culture in this country for a
long time and changing that culture is going to take some doing.
The harsh reality is that if the victims of this practice sit back and let it happen, then
it is likely to continue.
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