The Late Payment Bill is coming into effect at the beginning of October, allowing businesses the statutory right to charge interest for late payment of commercial debts.

Therefore, while the Bill gives you a statutory right to charge interest for the late payment of commercial debts, many of our clients feel this would jeopardise their relationship with key customers.

It is all very well saying to your key customer: "You are paying late. I am going to charge you another ten per cent." This would upset them and they are the very people who keep you in business!

Our research with business owners shows that, quite rightly, they are very cautious of biting the hand that feeds them.

The problem identifies weaknesses in credit management and there are better ways to improve your cashflow than charging interest at the end.

Under the Bill, the right to claim would be phased in three stages:

Firstly, small businesses will be able to claim against all large enterprises including public sector organisations. Approximately two years further on, the right will be extended for use by small businesses against all enterprises and the public sector. Probably after another two years, the right will be extended to all enterprises and the public sector.

Businesses will be encouraged to agree their own contractual terms but the Bill is setting down minimum standards of reasonableness to prevent more powerful companies forcing other agencies to accept unreasonable terms.

Peter G Meredith is a partner with Horwath Clark Whitehill

Converted for the new archive on 30 June 2000. Some images and formatting may have been lost in the conversion.