After reading the article on proposed reforms to the Construction Act to address payment abuse (2 September), I’d like to draw attention to a simple solution – the Late Payment of Commercial Debt (Interest) Act 1998:

  • Agree payment terms at the outset of a deal and stick to them;
  • Explain your payment procedures to suppliers;
  • Pay bills in accordance with any contract agreed with the supplier, or as required by law;
  • Tell suppliers without delay when an invoice is contested and settle disputes quickly.

A recent survey by the Better Payment Practice Group shows that businesses are increasingly using the late payment legislation; 28% have successfully charged interest under late payment legislation, an increase up from 20% last year.

The interest rate for firms wishing to apply this legislation is 12.5% for payments overdue between 1 July and 31 December 2005. The interest rate for 1 January to 30 June 2006 will be the Bank of England base rate on 31 December 2005 plus 8%, but the figure will be published in due course.

That should concentrate the minds of those within the industry that are promoting no change and protectionism.

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