SMALL businesses are in greater danger of failing because changes to the Late Payment Act could jeopardise their economic stability, according to the Association of Chartered Certified Accountants.

At present, the legislation allows small firms with fewer than 50 employees to charge larger companies interest at eight per cent above the basic rate on overdue invoices.

In November 2002, this right will be extended to enable all businesses to charge interest on unpaid debts.

Robin Jarvis, head of ACCA's small business unit, said a significant number of businesses failed each year due to late payment.

"So far, many small businesses have been reluctant to use their rights to deal with persistently late paying clients for fear of driving away business.

Now they could be faced with a situation of 'double jeopardy' because while they may not take advantage of the Act, it is likely that larger companies will."

Mr Jarvis said small businesses could avoid the impact of the legislation by adopting a culture of better payment practice, including invoicing clients immediately and accurately.