More businesses claiming compensation for late payment

The proportion of small business claims for late payment that include compensation has risen over the last two years, research finds.

In 2010 just 25 per cent of claims handled by debt recovery law firm Lovetts included compensation, rising to 27 per cent in 2011 and 31 per cent in 2012.

From the start of 2013, 33 per cent of claims have included compensation.

However, according to Lovetts, many small businesses are missing out on the opportunity to claim compensation because they haven't laid down any firm ground rules at the outset of new business relationships.

The firm urges businesses to take a tough line on late payment and if necessary use the legislation already available to them.

Lovetts advises companies to make sure the customer understands that legitimate costs, compensation and interest will be claimed if late payment occurs.

Having done this, businesses should call or email after invoicing to check the invoice has arrived with the right person to approve.

As soon as it becomes overdue, the customer should be called and reminded that late payment compensation and interest are  due on each invoice and that they will be claimed if it goes legal.

Charles Wilson, CEO of Lovetts says, 'New late payment  regulation was introduced in March but based on the poor use of existing legislation, I have very little faith in the EU directive making any impact on late payment practices.

'It comes down to business relationships and ensuring that in the early stages SMEs make clear that they won't stand for any delays and will claim costs if necessary.

'With suggestions that the economy is starting to pick up, we would urge the small and medium sized firms to tackle the issue of payment upfront as new customers come on board. Don't let it become the elephant in the room.'