BUSINESSES are enforcing stricter payment terms as they endeavour to cope with difficult trading conditions, according to research.

Late payment has long been the bane of small firms which can founder without sufficient cash flow.

Firms are now tightening their credit policies and enforcing payment terms with the threat of legal action much sooner than they did when the economy was brighter.

Debt recovery law firm Lovetts said that businesses waited 97 days on average before they issued a Letter Before Action (LBA) in the last quarter of 2010, but this dropped to 91 days in the final three months of last year.

Once the LBA has been sent, firms are allowing debtors two days fewer in which to pay up.

Lovetts chairman and managing director, Charles Wilson, said: “There’s definitely a feeling of businesses battening down the hatches to ride out the economic storm.

“Issuing an LBA at 91 days is a significant change from where we were a year ago and a clear signal that economic conditions and the problems in the Eurozone are prompting a change of behaviour in the finance and credit departments of firms across the UK.

“It makes absolute sense in the current climate to put cashflow at the top of the priority list.

“That means taking a much firmer line on late payers

“The days of tip-toeing around the issue are well behind us – a customer that doesn’t pay on time is a debtor and by acting quickly and decisively on outstanding payments businesses will discourage late payment becoming a regular habit.”