Press office

“The latest figures are showing that the average time for commercial debtors to pay, beyond agreed payment terms, has increased substantially over the last few years.

“There are plenty of legal remedies available to suppliers to ensure prompt payment, or at least to provide compensation in the event that payment is delayed. In particular, the law provides for payment of substantial interest, currently 8.5% on commercial debts unless the contract expressly provides otherwise. The relevant legal provisions are also to be strengthened by March 2013, on the back of EU legislation, which aims to limit agreed payment terms for most contracts to 60 days.

“The problem of course is that regardless of the legal position, many suppliers feel that they cannot insist on payment of the interest which is lawfully due to them where they have an on-going relationship with that customer, for fear of damaging the future relationship. Creditors have to weigh this risk against the impact of late payment on their cash flow and when the balance tips they need to enforce their rights.

“For undisputed debts, payment can normally be swiftly extracted by a lawyer’s letter and the future commercial relationship may even survive, with a marker set down regarding future payment. In other cases however more formal action will be required. Unless there are genuine reasons for non-payment, court proceedings will often result in payment of the debt with interest and some legal costs, but if defended such proceedings are likely to take a considerable amount of time. An alternative, for undisputed debts, is to use a statutory demand and/or winding-up petition, which is likely to result in very swift payment of the debt in full, including interest. If creditors resort to the use of a winding-up petition however, they should not be expecting further business from the customer involved.

“In short, the law gives ample rights to creditors and ample ways of enforcing those rights. The question is whether it is commercially sensible to enforce those rights and if so, by what method.”