Stiffer penalties for late payers

COMPANIES that fail to pay their suppliers on time will face stiffer penalties if a European commission investigation next year concludes current charges are inadequate, writes Ruth O'Callaghan.

Irish business groups are complaining that not only is the present legislation inadequate, it is a total failure. Under laws in force since August last year, companies in Ireland are allowed to charge a penalty interest rate of 0.02% a day on bills unpaid after 30 days.

However, lobby groups contend that most small businesses are being forced to sign separate payment contracts, particularly with large customers. These set longer payment deadlines, effectively rendering the regulations redundant.

third of businesses surveyed in July by the Irish Small and Medium Enterprise Association (ISME) said payments were actually taking longer to come in than before the legislation was introduced. Only one in eight said they were being paid within 30 days.

"It has patently failed to deliver for the vast majority of small businesses," said Jim Curran, ISME's head of research.

Research by the European commission shows that one in four insolvencies is caused by late payment, resulting in the loss of 450,000 jobs every year across member states.