Tuesday, January 21 11:02:46
There was a 3pc increase to 71pc in the number of companies who experience late payments on their credit terms representing "a stranglehold" on smaller firms' finances, according to the Small Firms Association (SFA) today.
Its latest survey shows that 52pc of companies have a written contract on payment terms with their customers (an increase of 4pc on January 2013) while 44pc carry out credit checks on new customers.
It also found that 69pc of firms review payment performance of customers and 58pc give credit more selectively based on this and just 10pc use debt collection agents and 8pc include late payment charges to slow paying customers.
The Acting Director of the Small Firms Association (SFA), Avine McNally has said that late payments in Ireland are compounding a difficult financial environment for many small firms. With the average payment in Ireland taking 62 days.
"Getting paid on time is a never ending problem for most small businesses. Late payment causes serious cash flow problems; requires firms to extend overdraft facilities and consumes a great deal of management time. This in turn affects the ability of the business to compete, be profitable and grow."
The Late Payment in Commercial Transactions law, which was amended by an EU Directive, was transposed into Irish law in March 2013. This legislation allows companies to automatically charge interest penalties on accounts outstanding beyond 30 days. But nearly 1 in 4 firms were unaware of the legislation and just 8pc have used the legislation to get payment, according to the survey.
Ms McNally highlighted that a frustration for many firms is if they are unsuccessful in gaining payment through the late payment legislation, they must pursue the outstanding debts through the court system. "Irish companies have problems gaining access to court due to administrative backlogs, the lengthy delays in setting up court dates and the costs."