BEC-2 Reading Exercise(5)

    Questions 25-32

    Read the text below about the problem of late payment in business and answer questions 25-32 on the following page.

    THE PROBLEM OF LATE PAYMENT

    Small and medium-sized businesses have had a hard time over the last few years. In the UK thousands of businesses have gone bankrupt as result of declining markets increased competition from abroad and rising overheads. However another factor which is common to many bankruptcies is the lack of cashflow caused by late payment of invoices.

    1. In 1996 a survey by Thornton Hughes International discovered that more than a quarter of businesses in Europe have to wait more than 90 days to be paid and 8% of businesses are forced to wait more than 120 days. Late payers often say they settle their accounts late because of recession but there is evidence that many firms are using late payment as a method of improving their own cashflow. A survey shows that 36% of delays in payment are intentional. By delaying the settlement of their accounts businesses transfer their financial problems to other businesses. It is usually the smallest firms that suffer most from this kind of behaviour.

    2. There are now plans to do something about this problem. The European Commission (the governing body of the European Union) suggests there should be legal penalties for late payment. Late payers should be legally required to pay interest on the debt. To be effective, the interest rate would be high. Finally, a system of fins (to be paid in addition to the interest payments) should be introduced. A recent survey in the UK revealed that 35% of transactions are carried out without any contract at all. It was therefore unclear when payments wee due. In Denmark even though the problem is smaller, the authorities have decided to deal with it by automatically applying a legal payment period when there is no written contract. This ensures that payment is fixed at 30 days after the creditor has requested payment.

    3. Many of the cash problems of small and medium-sized companies are, in fact, caused by national and local government agencies settling their accounts late. The European Commission has proposed that this area should be looked at. They point out that in some countries, for example the USA interest on arrears is already paid automatically by public authorities. In France cities publish dates of their payments to contractors to show how quickly they settle their debts.

    4. The European Commission suggests several other ways of dealing with the problem of late payment. Firstly, they suggest offering courses for small businesses. These courses would include legal advice on drafting contracts and on methods of obtaining payment for outstanding debts. Secondly, they would offer workshops to the public officials who are responsible for dealing with contracts. Thirdly, they suggest national campaign to persuade large organisations not to take advantage of their greater financial strength and size when they are dealing with smaller businesses. Part of the publicity would be the message that if we work together to make payment periods shorter we can help not only the financial health of small and medium-sized businesses, but also that of the economy as a whole.

    Questions 25-28

    For questions 25-28, choose the best title for each numbered paragraph from the list below. For each numbered paragraph 1-4, mark one letter (A-G).

    Do not use any letter more than once.

    25. Paragraph 1.

    26. Paragraph 2.

    27. Paragraph 3.

    28. Paragraph 4.

    A. Assistance from the law

    B. International credits

    C. Reasons for late payment

    D. The effects of recession

    E. Late payment by public bodies

    F. Training and information

    G. Using overdrafts