SMALL and medium-sized businesses are often "held to ransom" by larger firms despite new legislation covering late payment of bills, according to a business services firm.

Dealing with late payment can be one of the most time consuming and fraught aspects of running any business, even after the introduction of the Late Payment Act which allows small companies to charge interest on unpaid debt.

Stephen Lee of QuickBooks, which produces accountancy software for small firms, said: "The truth of the matter is that the small and medium enterprise (SME) is too often held to ransom by the larger business.

"The Act might be a welcome step in the right direction but how many companies will be willing to enforce this against a larger company who might be their largest customer.

"Businesses need to take ownership of the whole payment process themselves. By helping themselves they will be better able to manage their own relationships."

Steps firms can take include checking customers before offering credit, making sure suppliers can deliver what they promise on time and sending out invoices on time.