Crackdown on late payments
LATE payments, the scourge of many a small businesss cashflow, could become history thanks to new legislation introduced this month.
Under the Late Payment of Commercial Debts (Interest) Act 1998 small businesses, defined as those with 50 or fewer full-time employees, will be able to claim interest automatically from large businesses and the public sector on overdue payments. In the absence of an agreed credit period, the Act sets a default period of 30 days.
The rate has been set at 8% over base, or 14.75%. "Thats quite brutal," says Jeremy Lewis of chartered accountant Grant Thornton. "It might get late payers to change their ways. With tough times ahead, late payments can all too easily become bad debts."
The new rule applies to contracts agreed after Nov 1. *