Late payment by customers is proving a major headache for nearly three-quarters of middle market firms experiencing cashflow problems.

A survey by Lloyds TSB Commercial showed 73 per cent of the companies blamed late payments, ahead of declining demand and difficulties obtaining trade credit, blamed by 53 per cent and 23 per cent respectively.

More than a quarter of the firms reported the average time their debtors took to pay had increased over the past year.

Manufacturers were hit hardest, with 38 per cent being forced to wait longer for their cash.

Retailers emerged in the best shape, with only 15 per cent facing longer delays.

Overall, 23 per cent of companies faced increased waiting times of at least three weeks before receiving payment.

The survey revealed only two per cent of all firms had used the protection offered by the Late Payment of Commercial Debts Act, introduced in 1998 to encourage better payment habits.

Of the 81 per cent of companies that said they were aware of the Act's existence, 40 per cent were unsure whether it afforded protection on money owed to them.

Richard Iwinski, south-east area director for Lloyds TSB Commercial, said: "These results serve as a warning to all businesses that companies can find themselves at risk of failure if they don't put systems in place to ensure they receive money owed to them."