According to research conducted by BACS in 2015, “over three quarters of UK businesses suffer from late and non-payment of invoices. The payment giant, which processes millions of electronic business payments every day, found that an astonishing 76% of businesses are being affected by late payments of up to 6 months beyond agreed contract terms.
BACS also revealed that in companies that are suffering from late and non-payment:
- 20% of directors have been forced in to taking a pay cut
- 26% have had to increase bank overdraft use
- 23% have no choice but to pay their own suppliers late”
The effects of late payment can be extremely detrimental to the economic health of a business and its owners.
The Late Payment of Commercial Debts (Interest) Act 1998 was introduced to compensate creditors for the late payment of debt and to deter late payment. It only applies to the commercial supply of goods and services where you don’t have a provision for interest in your Terms of Business.
In brief, it enables you to claim interest and compensation for invoices that are not paid on time.
You can claim Late Payment Interest and Compensation if:
- You have supplied goods and services
- Your buyer bought for business purposes
- The contract is not governed by a consumer credit agreement
You don’t have to tell your customers that you will claim Late Payment interest or compensation if they fail to pay on time before they have actually breached your payment terms. However, it may be beneficial for your cash flow to tell them in advance of your intentions, should payment be made late. You could put warnings to this effect on your invoices; your statements and in your terms of business.
Full details of how much you can claim can be found on our website: http://www.acquit.org.uk/claiming_late_payment_interest_and_compensation