Late Payment of Invoices (1998)

Last Word

Updated: Late Payment of Invoices (2002)

Is the Act really making a difference to business practices?

The first phase of the Late Payment of Commercial Debts (Interest) Act 1998, which gave small businesses the right to claim interest on debts run up by large businesses, was often ignored or circumvented. In many cases, small companies were reluctant to lean on their large customers for fear of losing future business or simply annoying the customer. While on the other hand, those who did bring up the existence of the new law found themselves being pressed into the 60-day payment terms which many large companies favour.

The second phase could see the Act being used much more as small businesses are now able to claim interest on debts incurred by other small businesses. Such a situation may be seen as less threatening and more likely to bring about desirable results – indeed, one in five small businesses believe that this second phase will improve the payment culture in the UK. Let’s hope this is the case. The Federation of Small Businesses has found that the average time it takes for a bill to be paid is 46 days!

Many believe that the real change will come when businesses (both suppliers and purchasers) began to regard the Act as standard business practice. The more companies include the Act as part of their regular payment terms, the more buyers will be aware that companies are prepared to use legislation if their business partners do not pay them within an acceptable time frame.

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