Cash-strapped small firms are being made to wait longer for payment as large companies clamp down on costs says a Bradford business leader.

And a new report warns that small firms will face hardship if the Govern-ment repeals a pledge of its predecessors to settle bills within five days.

Sandy Needham, chief executive of Bradford Chamber of Commerce, said some major companies – already among the slowest payers – have extended their invoice payment time from 60 days to 90 days.

Late payment was getting worse for many companies and was an issue high on the agenda of the Chamber, which represents 1,100 businesses.

Sandy Needham said: “Late payment is an increasing problem and particularly effects smaller businesses whose cash flow is dependent on a regular income.

“We have heard about some larger companies extending their payment terms from an already relatively long period of 60 days to 90 days, which could mean real problems for some firms.

“Having to wait so long to be paid hits companies that need day-to-day cash to keep going and who increasingly have difficulty in getting overdrafts to tide them over.

“Late payment is a cause of great anxiety for many firms. For smaller businesses it can be difficult to tackle the matter with a large customer for fear of damaging the relationship and losing business.

“For some one-off debts firms are turning to debt collection agencies to chase payment.”

Yorkshire businesses could be losing up to £87 million a year chasing late payments, according to research by Bibby Financial Services. It said regional firms spend a total of 762,000 days a year chasing payments – equivalent to an annual cost of £775 per firm.

Bibby is concerned about Government plans to increase its payment terms from five to 30 days, overturning a pledge given by former Chancellor Alistair Darling in his final Budget.

Graham Cooper, Bibby Financial Services regional spokesman, said: “If this goes ahead it could rub more salt in the wounds of small businesses in Yorkshire which supply the Govern-ment with products and services.

“Owners and managers will no longer be able to rely on timely payment from the Government and this, coupled with chasing for late payment from other customers, could bring cash flow to an abrupt halt.

“Our research demonstrates that late payment continues to be one of the biggest challenges faced by the region’s small and medium-sized businesses.

“Firms cannot keep stalling payment and expect it to have no consequences.”