Lovetts welcomes Tesco move to cut payment terms to 14 days
Following the announcement by Tesco that it plans to cut its payment terms to 14 days, for suppliers that are small businesses, Lovetts, the commercial debt recovery legal firm is warning SMEs not to become complacent in the pursuit of overdue invoices, in the hope that other businesses will simply follow suit. Instead, Lovetts is urging SMEs to use the Tesco initiative as a signal that a more robust approach to late payment may win them respect rather than lose custom as many SMEs fear.
According to Lovetts’ figures, firms spent an average of 99 days waiting for an invoice to be paid, in Q3 2015, before instructing their solicitor to issue a Letter Before Action (LBA), threatening legal action.
Charles Wilson, Chairman of Lovetts says, “There is a real fear that by chasing late payment, SMEs risk damaging the client relationship. In our experience this fear is unfounded. The trouble is that companies capitalise on this fear, so it’s encouraging to see Tesco make some steps towards addressing the issue, albeit not until June 2016.
“We urge businesses to act early on late payments. Lovetts clients are using LBAs to take control of late payments and 84% of companies pay, when faced with the threat of legal action. An LBA is not a barrier to trading – as long as there is good communication between supplier and customer and clear contract terms, the customer will be under no illusion that it will be more expensive if payment is delayed. In over 8 out of 10 cases, a simple warning of legal action is enough and can cost businesses less than a cup of coffee.”