As a small business owner you will find that there are many great aspects to being your own boss. However, as your own boss, you are responsible for all sides of the business and the one aspect that seems to cause the most stress is finances. Not only do you have all the outgoings to consider, such as utilities and business insurance, but you also need to carefully monitor your incomings. It is important that you don’t take customer payment for granted as late payment is an extremely common occurrence.

A recent report highlighted the issue of late payment which has remained poor in the UK, with businesses averaging a late payment of 25.2 days. Would your business be able to cope if your customers continuously paid their bills this late? The further north you go, the later payments get, with the North West paying their bills an average of 35 days behind schedule. This reduces in the south west, where bills are settled an average of less than 20 days after their deadline.

Receiving payments late can cause major cash flow issues, not to mention profit losses and time wasted chasing payments. Maintaining a healthy cash flow is essential to the success of any business, and late payments from customers can cause this flow to become disrupted, having a knock on effect to credit worthiness and borrowing money.

This common problem can not only cause huge problems for you, but if businesses begin to collapse as a result of continued late payment, then the economy as a whole will suffer. In an attempt to address this problem, 1998 saw the introduction of the Late Payment of Commercial Debts (Interest) Act. The act was launched by the government to ensure that businesses that employ less than 50 members off staff are legally allowed to charge customers interest for late payments.

If you receive a payment over 30 days late, it is within your right to charge your customer interest at 8% above the Bank of England’s base rate, whether or not this was outlined in the terms and conditions agreed between you and your client.

Betty Friggott writes around a range of business and finance topics, including business insurance.