Credit experts are warning engineering firms to ignore forthcoming government legislation allowing companies to charge interest on late payments.
The Credit Protection Association advised that the rules will not force customers to pay earlier. According to the CPA, the best way firms can ensure they get paid on time is to make sure their customers understand the credit terms and by taking prompt action on overdue payments.
The warning coincides with the revelation at the weekend that the Department of Trade and Industry, which is bringing in the legislation, has one of the worst late-payment records of any government department.
The DTI admitted it ranked 51st out of 57 departments and agencies in a league table drawn up by its own officials.
David Baber, managing director of the CPA said the legislation due on 1 November will extend to all companies the current right of small firms to claim interest on late payments. But he warned that the new powers would be as widely ignored by industry as the current legislation, which has been in force for 18 months.
`It will flop. Charging interest on a £200 bill, for instance, will simply cause annoyance.
`Our advice to engineering firms is to ignore the legislation. Instead, put proper credit control procedures in place. Invariably we find that companies who are proactive about bad debts get paid on time or soon after.’
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