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The government is launching a crackdown on the late payment culture.
Businesses that keep their invoicing details in office box files have been advised to proactively agree payment terms with their suppliers and customers before dealing with orders.
The Department for Business, Innovation and Skills has highlighted the importance of prompt payment for small and medium-sized enterprises, because even a small delay can have a serious impact on a micro firm's cash flow.
Business and enterprise minister Mark Prisk explained that the Association of Chartered Certified Accountants (ACCA) has published a guide on prompt payment practices, while a new working group will be looking into the issues surrounding late payments.
"It is hugely important that all businesses, particularly small firms, establish clear payment terms to ensure they get paid on time and successfully manage their cash flow," he commented.
"The government is already setting a strong example by paying 80 per cent of invoices within five days and the Prompt Payment Code is encouraging best practice.
"What's more, we have secured the agreement of business representative bodies to come together and establish a prompt payment workshop, to explore these issues more fully and develop business-led solutions. We must continue to promote prompt payment to ensure our small businesses can thrive and grow," added the minister.
The government's action came after research by Experian last month found it took an average of 25.6 working days for companies to settle in full in 2011, up from 22.5 days the previous year and 21.5 days in 2008.
It also revealed that the worst offenders are often the larger companies, who pay their suppliers an average of 34 days after agreed terms, while small businesses pay up between 20 and 22 days late on average.
"Late payment is endemic. We need government to do more than make token comment. We need them to really drive activity," commented Philip King, chief executive of the Institute of Credit Management.
[ms1]http://www.theofficesuppliessupermarket.com/category_box_files_73085.aspx