By Robert Harris

LATE payments, the scourge of many a small businesss cashflow, could soon be a thing of the past thanks to new legislation introduced this month.

Small businesses, defined as those with 50 or fewer full-time employees, will now be able to claim interest automatically from large businesses and the public sector if they do not pay on time.

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 1 November.