With the recent news that big companies could be forced to publish figures on how long they take to pay their bills to smaller firms, Lovetts plc, the debt recovery law firm, has revealed that rather than tightening credit control processes to support financial recovery, many businesses appear to have relaxed their attitude to late payment.
Lovetts has found that, in the first half of the year, businesses allowed their customers an extra 28 working days on top of their standard payment terms – meaning that firms are now waiting an average of almost 4 months before they take the first steps to recover money owed for products and services.
While late payment is an issue in all sectors, evidence shows that manufacturing and construction are the worst offenders – with a recent report into the issue from a group of MP’s, calling for the Government to establish a Construction Code of Conduct, to help manage the problem.
The report also suggests that fair payment should be a contractual requirement for new Government contracts, with directly contracted firms paid within 14 days, sub-contracted firms within 19 days and those firms sub-contracted twice within 23 days.
Charles Wilson, CEO of Lovetts, commented: “Clearly, protecting business relationships is essential, but if the cost of that is affecting a company’s own cashflow it is not sustainable business practice.”