Smaller firms are experiencing significant increases in the length of time it takes for larger organisations to pay them, the Federation of Small Businesses (FSB) has claimed.
As well as delaying invoice payments, the FSB argued that large companies are also imposing new terms on suppliers and charging settlement fees.
In some instances, the FSB said, big organisations are making suppliers wait for up to 100 days before paying bills.
Delays in payments can have serious consequences for the cashflow of smaller firms that lack the resources of large customers.
John Wright, the FSB’s national chairman, said: “Big companies appear to be aware that small businesses are afraid of taking them on over payment terms and are abusing their power as a result. Making small businesses wait 105 days for payment and charging them for the privilege of doing so is nothing short of outrageous.
“At a time when small businesses are finding it difficult to deal with a slowing economy and rising costs, it is shocking that large companies think it is acceptable to use them as an unofficial source of credit.”
The Late Payment of Commercial Debts (Interest) Act 1998 gives small firms the legal right to charge interest up to 8 per cent above the existing base rate on debts due from large businesses.
However, the FSB said that many small businesses are reluctant to take this course of action for fear of losing out on custom and contracts from larger organisations.
The worry is that some big companies may be making extended payment times a matter of policy.
Stephen Alambritis of the FSB said: “Many seem to be using the credit squeeze as an excuse to put in place permanent arrangements for long payment periods.”
The Payments Council is a group which aims to promote a better payment culture in the UK. More information on dealing with late payments is available at www.paymentscouncil.org.uk
Date:21 July 2008
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