Large businesses are still seen as the worst payers while small companies face the worst payment delays, a new survey shows. One year after the Late Payment Act came into force, the percentage of large companies paying their suppliers late has risen to around 54% in the latest quarter from 44% in the previous three months, according to the latest Credit Management Research Centre quarterly review. However, payment by small companies and central government has shown some improvement, according to the survey. Overall, payment periods have remained stable over recent quarters for domestic customers though payment beyond the due date has steadily increased for export customers. The Act allows small companies to charge interest of 8% above the base rate on bills unpaid after 30 days, unless prior agreement has been reached. A supplier can take a contractor to court if it ignores the demand for interest. In the experience of suppliers, the main reason for late payment by customers is that it is an intentional policy, said 23% of those surveyed. Close behind are cashflow and financing difficulties, followed by disputes, queries and procedural or systems hang-ups. Problems with large companies have been highlighted this year when, in March, business services group Rentokil Initial announced it would maintain a 60-day period while paying small suppliers up to 8% interest above base rates on unpaid bills. This controversial move was trumped just a few months later when retailer House of Fraser said it would impose a 75-day payment term. The CMRC survey also showed that more companies are using the legislation to secure payment with interest, with 5% of small firms making use of it compared with 2% six months ago. However, the number of companies saying they planned to use the legislation fell to 11% from 18% six months ago. Nick Goulding, head of policy at the Forum for Private Business, a strong supporter of late-payment legislation, said that figure was 'very high' given that the law was only a year old and was not retrospective. At present, small companies cannot extract interest payments from other small companies - those with 50 employees or fewer - though from November 2000, in phase two of the late-payment legislation, they will be allowed to slap 8% interest on overdue bills. Phase three, from November 2002, will allow all businesses to use the powers. Goulding said there was 'a slow but marked improvement' in payment practice and the law would have a significant impact. He said: 'The very presence of legislation sends a message that the government takes the whole thing seriously.' This was also backed up by the publicity surrounding the subject. Goulding added that the Forum's own surveys had shown that the level of concern over late payment had dropped consistently since the law was put in place. However, it would still take 'the best part of a decade' to work through. David Hands of the Federation of Small Businesses said the figure showing big business as the worst payers 'is the same old story - they've the clout to string people along'. But he also endorsed the view that the payment situation was improving. He said: 'A lot of boardrooms are now taking notice, but the cultural shift takes time to happen. Hopefully, people will start to realise that things have got to change across the board.' The survey also indicates that businesses are reasonably aware of initiatives to encourage better payment practice, with 44% of those surveyed aware of the work of the Better Payment Practice Group. While 47% were also aware of the British Standard for Prompt Payment (BS7890), only 4% currently hold it and a further 3% want to obtain it. The CMRC found most people thought the standard would have limited benefits, with over a third saying they did not have enough information about it.
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