9 October 2007

North West businesses are losing out on thousands of pounds in unpaid bills, according to Manchester city centre corporate and commercial law firm, Lopian Wagner. The company insisted that many small-to-medium sized firms in the region are paying the price of late payments because they are not aware of their legal rights.

The warning comes as research carried out by the Forum of Private Business (FPB) and credit agency Graydon UK, reveals that nearly three quarters of small business owners believe late payments are a threat to their businesses' stability.

According to the recent survey, 75% of those questioned said they do not employ a credit management professional, meaning managers or owners are left chasing payments when they could be working more productively for their firm.

Kate Baker, associate and litigation specialist at Lopian Wagner, commented: “Late payments are a problem that affects most businesses at one time or another. It can be an extremely awkward situation. On the one hand, you need to extract the money to ensure cash flow but on the other hand you don’t want to chase the customer too vigorously as you may lose them.”

Under the Late Payment of Commercial Debts Act (part of the Interests Act 1998) small businesses – companies with less than 50 employees – have the right to claim interest on debts that are older than 30 days, unless a contract specifically states different terms.

Baker, who deals with debt recovery for the individual debtor through to the large Plc, said: “The current interest is set at 8% over the official bank lending rate. So, for example, if that rate is currently 6% the interest rate that you are entitled to claim is 14%.

“Charging interest usually acts as a wake-up call to debtors, who may well start paying on time to avoid being hit with additional costs.”

She warned that if the amount under invoice remains unpaid for a period of more than three months, then businesses should take appropriate action.

Baker added: “We would advise a client to firstly send a letter to the debtor. If there’s still no response, proceedings should then be issued in the County Court for recovery of monies due under invoice.”

Only when the debt is not disputed and is due for over £750, should a company consider issuing a winding-up petition, a legal process where a liquidator is appointed by order of the court to 'wind up' the affairs of a limited company. At the end of the process the company ceases to exist.