Despite often clearly spelling out their payment terms SMEs are having to wait an average of 41 days over the agreed payment terms from many of their customers.

Recent research shows that in 37% of cases customers are stretching payment terms by up to three months and at any one time £24billion is owed to SMEs.

The increase in VAT will only worsen the situation warns the Law Society and urges small business owners to guard against the problem of late payment.

The Society says that not enough businesses are aware of the protections available to them which safeguard against cash flow blockages. Solicitors will be able to help SMEs take advantage of these.

Law Society President Robert Heslett says:
“Average commercial debts caused by late payments are high in the UK, and for SMEs a lack of cash flow can be crippling. With credit less available to those businesses from banks, late payments have a far more serious consequence for SMEs.

Considering the amount of red tape SMEs and start-ups are faced with, it is no surprise that seeking protection against late payment from customers does not come top of the to-do list. However, it could be the difference between the business surviving or not, especially in the uncertain economic climate.

A carefully worded contract drawn up by a solicitor between a business and their commercial customers can include clear terms on late payments, including penalty clauses and strict time frames for payment. Such terms can act as an effective deterrent for late payment and encourage timely payment for services, thus avoiding these terms coming into play.”

The Law Society says that contracts between businesses which include late payment clauses need to become a common feature of the SME market. The European Union is currently looking at updating a directive aimed at tackling late payments such is the impact on the SME sector across Europe as a whole.

Robert Heslett adds: “Many smaller businesses perhaps felt the recent budget did not do enough to tackle cash flow problems head on, and although the EU is looking at it, the safest bet is to protect against cash flow blockage between the customer and the business with a solid, solicitor-drafted contract.”

Avoiding court
The Law Society says that should SMEs and start-ups hit problems with customers failing to meet payment deadlines, court is not the only next-step option. Alternative Dispute Resolution and mediation are alternatives for SMEs.

Law Society President Robert Heslett says: “There is a presumption that going to court is the only course of action when late payments cannot be resolved. However, many solicitors specialise in ADR and mediation, which can prove an effective way of solving the problems for SMEs and other businesses. ADR and well-drafted contracts can be effective in avoiding the last option, going court.”

Three former British Airways employees and one current employee had been charged with colluding with Virgin Atlantic to fix fuel  surcharge prices between 2004 and 2006.

The court heard on Monday that the Office of Fair Trading had failed to disclose key information to the defence, including an e mail that suggested that Virgin Atlantic had increased its fuel surcharge without consulting BA during the period in question, ending any speculation that the two companies had colluded.

William Boyce QC, defending one BA executive, said that had this e-mail come to light earlier, the case may never have come to court.

What a waste of time and money!

Your Solicitor, Qualified to Answer

The Law Society have launched a campaign entitled Your Solicitor, Qualified To Answer which uses the Beatles influenced strapline Help, I Need Somebody. The campaign will run from September 21st until November 21st and will be featured in printed media and in more than 200 stations, where it is estimated that there will be 100million chances to see the advertorial.

The campaign is aimed at making the consumer aware of the problems that solicitors can help solve and how having the right legal advice can help save money, time and heartache.

Advertising will direct the public to www.lawsociety.org.uk /commonlegalproblems where they can search for a solicitor to help them through the ‘find a solicitor’ service as well as more in-depth information about how solicitors can help.

The law society common legal problems focus on making a will, probate, setting up a home with your partner, renting out your property, renting a home, financial matters for the elderly, buying a home, getting a divorce, personal injury claims, problems at work, setting up a business, using a solicitor, and asylum.

Des Hudson, Law Society Chief Executive says: “Most of us need expert legal help at some time in our lives, but not everyone knows where to turn. Unfortunately most problems don’t just go away, and by ignoring them they can get worse – and more expensive.”

For anyone thinking of starting a business, a solicitors advice is invaluable as this advice from the Law Society explains:

With the recent downturn a lot of consumers are finding themselves ploughing their redundancy money into new businesses.  Statistics from the Government Insolvency Service show that in the twelve months ending June 2009, approximately 1 in 120 active companies went into liquidation – an increase of 39.1% on the same period a year ago.  One of the reasons many businesses fail is through lack of planning beforehand. “A solicitor will be able to answer the questions to help you decide to pursue your business ambitions” says Des Hudson.

Solicitors offer a wide range of services. From writing wills to resolving disputes between neighbours, from problems at work to buying and selling your home and putting together your Home Information Pack.