Most people think that existing Late Payment legislation cannot be applied to their business. They will argue that 'I cannot claim late payments from my customers because they will just do business with other people and I'll lose clients'.
This is a common misconception. The issue is not to wield Late Payment legislation against current customers in this way, but as a negotiating position to demonstrate to them how much grief they are causing by paying late, and if one of their suppliers could claim this amount, then they need to look at their buying policy and make provision for late payments in the future.
The Late Payments legislation can be used for the following:-
- To pursue late payments going back 6 years from ex-customers
- To work as a negotiating tool with existing customers to improve payment performance or increase prices
- To identify possible liability with your suppliers should Suppliers use late payment legislation against your business
Late Payments legislation will require businesses for the first time to account for Late Payment compensation that can be extracted from the Debtors but also late payments exposure to Creditors. At present no-one in the UK understands their position on this and it will become very important as this legislation gathers acceptance.
Accountants should be aware and start advising small businesses that payment on time is crucial to minimise exposure at present this is all just swept under the carpet and ignored.
Late payments are progressively causing small businesses out of business as SME's are essentially funding larger companies with forced extended credit terms.
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