Tag Archives: cash-flow

Why you should claim Late Payment Interest and Compensation

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”

* Source http://www.debtadvocate.co.uk/the-effect-of-late-payment-on-business/

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



Insolvency in the Construction Industry

Here’s some concerning information about insolvency in the construction industry from the team at Burton Sweet Corporate Recovery.

Interestingly, this industry has always contributed a disproportionate number of business failures. Graham Down, Director at Burton Sweet, says that according to the most recent figures produced by the Office of National Statistics, construction output has fallen for each of the last two quarters, meaning that it is technically in recession.  They offer a free initial consultation to any business in the construction industry who is facing difficulty.

So, what are the most common causes of the high failure rate? According to Burton Sweet, they are:

  • Retention

Companies are failing to keep track of, or even chase, retentions. A Retention is a sum (commonly 5%) held back from by a client from the contractor (or the contractor from sub-contractors) so as to ensure that the contractor completes all its contractual obligations.  Half of the retention is normally released on “practical completion” of the contract with the remainder paid over at the end of a “defects liability period”.

  • Housing Grants, Construction & Regeneration Act 1996 (HGCRA)

Companies are failing to apply their statutory rights when a client or main contractor pays less than it should. The HGCRA was set up to identify poor payment practices and extensive, expensive and time-consuming disputes as amongst the key problems besetting the construction industry

  • Record keeping

Not all contracts need to be in writing, believe it or not; an oral contract is usually just as binding on all parties.  In the past, they needed to be in writing to be protected by HGCRA (see above) but that has now changed.  Consequently, disputes over contracts are difficult to resolve if there is no paper trail.

  • Over-stretching

Over-stretching has been the downfall of many well-established construction businesses due to companies taking on work outside of their usual remit when times are hard, resulting in costly mistakes, delays and having to re-do work.

  • Supervision

Even the most experienced and well-qualified employees can get it wrong sometimes.  Tendering, estimates and contract documentation need to be checked rigorously; the buck always stops at the top.  Many companies in the industry have been brought to their knees because of administrative failures before a job started.

  • Over-exposure

The construction industry is disproportionately susceptible to insolvency.  When one company fails it can bring down suppliers and sub-contractors who are owed money – the so-called “domino effect”.  Because construction businesses are often involved in just a relatively small number of contracts at any one time, they are more vulnerable because they often have all their eggs in one basket.

  • HMRC

Due to the pressures of cash flow, money set aside to pay taxes as a lump sum, (PAYE/NIC, VAT and corporation tax (or schedule D for unincorporated businesses) & the Construction Industry Scheme (CIS)), it can be tempting to use it to ease the immediate situation, making it extraordinarily difficult to recoup and catch up.

Although these are examples from the construction industry, heeding issues such as record keeping, supervision and HMRC is good practice for any business.

Extracts courtesy of Burton Sweet Corporate Recovery, E-brief August 2016


Take Control – Cash is King!

Posted by admin

Controlling your cash-flow is of paramount importance; after all, it is the life-blood of your business. Now is an excellent time to review your credit control procedures. If you find you are being paid consistently late, legislation was introduced to try and protect you from this situation. The Late Payment of Commercial Debts (Interest) Act 1998 and was introduced in 2002.

The legal status of the business you are seeking to claim interest from is irrelevant. Late payment interest can be claimed except in the case of personal debt. You can have the best credit control procedures available; however, often the debtor will only pay up when threatened with action.

It pays to seek professional advice at the point of non payment. Contact from a third party such as Acquit will grab your client’s attention. A third party can assist you in maintaining a good relationship with your client who should understand that in these tough times cash is king and we all deserve to be paid on time!