AFRICAN AND BLACK BUSINESS DON'T CHARGE FOR LATE PAYMENT
Fewer than 1 in 10 African and black businesses in the UK use their legal right to charge interest on late payment from customers.
Business finance provider, Catties Invoice Finance said that the government's late payment legislation introduced five years ago which allows businesses to add 8% interest above base rates to invoices has had little impact on late payment which affects four in every five businesses.
The FSB agrees that late payment is the cause of many BME's financial headaches and have forced some startups out of business because of cash flow problems. The fact is that any small company will be in a vulnerable position if it has a contract with a much larger firm and that contract represents a significant part of the BME's turnover.
A survey carried out by the FSB last year revealed that over one-third of BME owners had more than half their household wealth invested in their business and 13% had over 75% of their household wealth invested. That's a lot to gamble on risking upsetting your customers over charging interest on late payment.
Late payment has been a problem for many years, with African and black businesses experiencing reduced profit margins and working capital, plus higher levels of borrowing and in some cases business failure. The 8% legislation suits monopolies or very large firms but generally lacks the sensitivity and finesse that is needed to keep smaller business relationships intact.