The Small Firms Association has said that late payments are strangling small business.

Patricia Callan, the SFA's director, said late payments are compounding an already difficult financial environment for many small firms.

She added that getting paid on time is a never ending problem for most small businesses.

This is causing serious cash flow problems, and means that firms need to to extend their overdraft facilities or engage in more borrowing which consumes a great deal of management time.

This affects the ability of the business to compete, be profitable and expand, Ms Callan said.

The SFA's latest Late Payments Survey showed that companies wait on average 62 days to get paid in Ireland, while 68% of companies experience late payments on their credit terms.

It also showed that 46% of companies have a written contract on payment terms with their customers; but only 24% include late payment charges in this. 43% carry out credit checks on new customers.

The survey also revealed that just 11% of SMEs use debt collection agents.

Despite the introduction in 2002 of the EU Directive on Late Payment in Commercial Transactions Regulations, which allows companies to automatically charge interest penalties on late accounts, the SFA said that 40% of respondents were unaware of the legislation while just 9% have used it to get prompt payment. Of these, just 4% were successful.

The SFA has called for a small claims court for business to be set up, a voluntary prompt payment code and an awareness campaign.