Late Payments - Interest Charged?

T.C.

If a client has not received payment from their customer and it is in the contract that they can charge interest on late payments, what is a sensible rate to charge the customer, as no rate was agreed with the contract? Any ideas please.

burg

See this link

http://payontime.co.uk/late-payment-legislation-interest-calculators

I'm pretty sure you need to notify before hand. i.e. write to them and state that if payment not received then you will apply the interest as per the legislation.

T.C.

That's brilliant. Thank you very much!

Monsoon

burg wrote: »

See this link

http://payontime.co.uk/late-payment-legislation-interest-calculators

I'm pretty sure you need to notify before hand. i.e. write to them and state that if payment not received then you will apply the interest as per the legislation.

Yep, agree with this. Don't forget the statutory late payment fee too.

stuart-elmes

If no rate was agreed in the contract then the Late Payment of Commercial Debt (Interest)Act (1998) applies, as amended in 2002 and 2013.

This provides a statutory right for a business to charge 8% plus the reference rate (set every six months based on the Bank of England base rate) on overdue invoices. You can also add a compensation charge for your recovery fees. There's more information here:

http://www.mycreditcontrollers.co.uk/Articles/2015_01_Interest_on_Overdue_Payments.html

The interest is calculated as simple interest, not compound. Here's an online calculator for late payment interest:

http://www.mycreditcontrollers.co.uk/late_payment_interest_calculator.html

While it may be good practice to warn a customer that you intend to apply late payment interest before you do so, there is no reason why you have to. It is your statutory right.