Huge pressures on cash flow this year have driven more businesses than ever before to exercise their right to charge late payment interest on bad debt according to Lovetts, one of the UK’s leading debt recovery law firms. Although still relatively under-utilised, there was a massive 114 per cent increase in the number of debts with LPI added in Q2 2009 vs the same period in 2008 according to Lovetts.

This huge uplift comes as more client companies choose to use LPI, and infrequent users now employ it more vigorously.

Furthermore, the actual LPI amounts claimed by businesses have seen a 37 per cent increase year on year.

The news comes on the back of the latest survey from the Forum of Private Business which found that 23 per cent of respondents selected late payment and, subsequently, poor cash flow as their ‘key issue’.

Charles Wilson, chairman and managing director of Lovetts said: “While these figures are hugely encouraging, Late Payment Legislation is still not used as much as it could be, nor are businesses recovering the compensation to which they are entitled. "The reluctance to apply LPI may be blamed on various factors, not least the delicate balancing act of maintaining good relationships with customers whilst being firm about payment terms. "It does seem however, that the tough trading conditions experienced this year have forced more businesses to reconsider their options, and as a consequence the number of invoices with LPI added has more than doubled."