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payment terms for businesses

Comment 26th July 2010

In the UK we should have a legal limit on the number of daya that can elapse before an invoice is paid. This limit should be 28 days

Why does this matter?

Several eurozone countries employ this principle and we should align ourselves, as we do in so many other areas. In the UK, some companies are operating with payment terms of up to 120 days and the number of companies increasing payment terms over and above 28 days is on the increase. What this means for small & medium size businesses is that we have to "save up to work for the large companies"

If a limit of 28 days were employed it would reduce the need for companies to have large overdrafts & therefore reduce the pressure on the banks

Currently, we have to limit the amount of work that we carry out for certain companies as we have to limit our exposure because the overdraft will not allow us to purchase the materials & commit the personnel when we are paying our suppliers & employees monthly.

The knock on effect is that we employ less people and cannot expand because our profitability is limited by the need to service an overdraft.

The legislation would not need to be enforced because most companies would fall into line and those that did not would be persued by their creditors with no govt. input required

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