Interestingly however, Lovetts figures also show that, compared to last year, late payers are being given nearly a month longer to pay up, before legal action is taken.
As the LPD rise shows, businesses are still determined to recover what is due to them, but the extreme cash flow pressures felt at the depths of the recession have relaxed to an extent. Companies are valuing their customer base more but will punish those who persistently break payment terms. According to Lovetts analysis, in Q2 2010, late payers were getting an extra 29 days to pay before commencement of a claim to recover the debt compared to Q2 2009.
Charles Wilson, Chairman and Managing Director of Lovetts says:
Whilst we would expect to see a lengthening of payment times following one of the worst recessions in recent times, we would encourage all suppliers to keep their eye firmly on the ball when dealing with their customers. Just one large outstanding payment could have a serious impact on cash flow, the knock-on effect causing long term damage to the reputation with its own suppliers as well as on its credit status.
The beginning of 2010 brought with it the news that the recession is officially over, and businesses are of course anxious not to damage customer relationships. Whilst they are happy to issue a late Payment Demand or LBA when required, we would encourage businesses not to become over lenient about enforcing their payment terms.
With concerns over a double dip recession, businesses need to bite the bullet and get tough on late payers. A customer that does not pay for goods or services, is no longer a customer, they are a liability.
