Debt Act 'will not protect resellers'

New legislation designed to offer legal protection to small companies will do nothing to help IT resellers, it has been claimed.

New legislation designed to offer legal protection to small companies will do nothing to help IT resellers, it has been claimed.

VARs contacted by Computer Reseller News dismissed the second phase of the Late Payment of Commercial Debts Interest Act, which comes into force on 1 November, as unimportant, unenforcable and irrelevant.

The Act, passed in 1998 and designed to protect small firms against potentially fatal cash-flow problems brought about by the late settlement of invoices, ensured that all large firms that exceeded deadlines for payment were liable to incur interest penalties.

When the second phase of the Act is enforced, small firms will be able to levy the same interest charges on each other. The general consensus is that it is a well-intentioned initiative, but futile.

Paul Jordan, sales manager at distributor Mayflex, said: "The biggest problem for small resellers is with big companies that do not pay them in time. But the law did nothing to solve that problem."

One reseller that wished to remain anonymous said there was a reluctance to rock the boat with large clients for fear of losing the business. "You cannot risk upsetting someone who constitutes 60 per cent of your business. They'll just take their business elsewhere," he said.

However, Nick Goulding, chief executive of the Forum of Private Business and representative of the Better Payment Practice Group, said: "We are putting in legislation that will change the business culture in the UK. Best-practice dictums simply do not work."

Goulding admitted that it could take up to 10 years to change the culture of late payment in the UK, but Jordan was unimpressed. "That's no good, even if legislation kicked in on time," he said.