Private businesses face new late payment legislation next year that could mean terms in excess of 60 days could be struck down in the courts as “grossly unfair”, according to business minister Ed Davey.
The Coalition plans to fast track the revised directive on late payment rules into law in 2012 – rather than sticking to the 2013 EU-wide deadline.
The regulation sets 30-days a standard terms for public and private entities to pay invoices. This can be extended to 60 days when suppliers have specifically agreed to give customers a grace period to review and acknowledge receipt of goods.
Small companies can also charge eight per cent interest on overdue invoices and as well as a £35 fee for costs. Business minister Ed Davey says the move will address some of the concerns expressed by small businesses owners over payment terms and late payment.
Research shows that Britain’s SMEs typically have to wait 39 days beyond their agreed payment terms before invoices are paid.
“The government’s renewed focus on the problem is another step in the right direction,” comments Peter Ewen, managing director of Venture Finance and chairman of the International Factors Group. “Bringing down late payment across the board will increase the availability of working capital for UK businesses and this would be agreat thing for them and the economy as a whole.”
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