Late paying companies can put huge pressure on businesses that require regular cash flow to survive. This is particularly the case with smaller business that may only be relying on just a few clients to survive.
The assumption is that late payers are usually companies that are struggling themselves financially and find it difficult to meet their obligations but as one recent high profile case has shown, this is not necessarily the case.
The Groceries Code Adjudicator has recently launched an investigation into Tesco’s treatment of its suppliers. This could have severe consequences for one of Britain’s largest businesses.
If it is found that Tesco paid its suppliers late in what is described as ‘bullying tactics’, then it is possible that compensation claims could amount to tens of millions of pounds subject to the Late Payment of Commercial Debts (Interest) Act 1998.
Alongside this the government is putting in place plans to bring in tough new laws and tightening up on existing codes of practice to tackle late payment.
If your business is affected by issue of late payment, you may be entitled to claim interest on the money owed for up to six years on every invoice that has not been settled unless the late payer can successfully contest that they owe the money in the first place.