Small firms in Ireland are waiting an average of 62 days for their invoices to be settled, but when it comes to debt collection Ireland's entrepreneurs are still reluctant to take action.
These are the findings of the Small Firms Association's Late Payment Survey, published in early January, which looks at the issues affecting the credit control and debt recovery Ireland's small businesses use to keep their accounts - and their non-paying customers - in check.
According to the latest figures, 68% of Irish small firms have late payments on their accounts, but while 57% ask for payment within 30 days, many are not backing this up with pre-emptive action.
Ireland's actions on extending credit
Most small firms in Ireland review their customers' payment performance - at 67%, this is the most popular pre-emptive action taken before extending a line of credit, and 58% adjust the customer's credit limit accordingly.
But only a minority take other actions, with just 46% setting out payment terms in writing, 43% carrying out credit checks on new clients, and just 24% specifying penalty charges for late payment in their written contracts.
Ireland's actions on recovery collections
For those companies that are forced to pursue late payments, the actions taken on debt recovery collections could be seen as a soft touch by many.
Just 11% of the debt collection Ireland's small firms undertake involves specialist debt collection agents.
And only 8% of all the debt recovery Ireland's entrepreneurs carry out includes the addition of late-payment charges to the amount owed by the customer.
Adding interest to debt recovery collections
Irish law already allows statutory interest to be charged on late payments, helping not only to penalise the non-paying customer, but also to make it more worthwhile to pursue recovery collections through to completion.
New EU legislation is due to be introduced in March 2013 to enshrine the relevant interest rates in law; however, this should not change firms' fundamental rights to add interest, but should only impact the rate of interest that can be charged on the debt collection Ireland's entrepreneurs carry out.
Sid Home Director of Safe Collections states "whilst the right to add interest is already enshrined in Irish law, it is relatively rarely used and in our experience most debtors will complain mightily about its addition and in some cases refuse to make any payment at all until it is withdrawn."
Overcoming 'the fear'
The survey revealed several reasons for the low rate of debt recovery Ireland's company managers carry out - with 73% choosing not to add the entitled rate of interest to their overdue invoices.
In 53% of cases, they are concerned about losing business; 63% think the customer is simply too big to pursue; and 67% are concerned about negative impact to their own reputation.
However, as the incoming EU legislation reminds us, no company is above the law when it comes to settling their debts, and any awareness campaign should help to make more potential customers aware of this, too.
As March approaches, it's a good opportunity to look at your approach to debt collection in Ireland, and make sure that you're protecting your reputation not only in terms of being a reasonable supplier, but also avoiding being seen as a soft touch by late-paying customers.
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