Reported on Wed, 22 Feb 2006

payments, prompting advice that they should consider taking out business loans to help cover the cost.

New research by analysts from HSBC found that despite nine out of ten SMEs in the UK giving customers a 40-day period in which to pay, only half receive payments on time.

Simon Wainwright, head of business banking at HSBC, explained that new government rulings allowing SMEs to charge interest on late payments went some way to addressing the problem, but the increasingly prevalent trend of late payments would be harder to completely reverse.

"Cash flow problems can be a major contributing factor to business failures, but legislation alone is not the answer to the problem."

Mr Wainwright revealed that only than one in 20 SMEs charges interest on late payments, and he advises businesses to improve their invoicing processes.

"We find that late payment is often caused by poor processes and procedures, rather than unwillingness to repay. It is therefore essential that companies have good credit management procedures in place, together with a robust policy on the late payment of invoices."

Late payments can act as a barrier to sector growth, but business loans can help SMEs to cope.

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