The Late Payment Of Commercial Debt Regulations
The late payment of invoices is one of the biggest problems businesses face, according to BACS. In a 2019 study, figures proved that UK-based SMEs were collectively facing £24.4 billion in late payments and bad commercial debts, which is an immense increase of over £10 billion from 2018.
This has significantly heightened even further due to the current climate of the COVID-19 Pandemic. The economy as a whole has taken a dramatic hit due to these circumstances, leaving 62% of all small businesses at risk of folding. Late payments are a prime contributing factor of this as larger corporations choose to prioritise themselves during these uncertain times.
While late payments from a customer can be challenging to control, the law is on your side. Today, we’re here to shed light on your legal rights regarding the late payment of invoices, so that you can make a confirmed decision in what actions you need to take to be reimbursed your debts.
Firstly, we’re going to address what the law says about late payment of invoices; then, we will explore ways in which, we, the team here at Athena Debt Recovery, can support you in your next steps.
Late Payment Law
Legislation regarding the late payment of invoices comes under The Late Payment of Commercial Debts (Interest) Act 1998. This act was set up to help tackle the problem of tardy payments and to compensate creditors when commercial customers did not pay up on time.
Under this act, the law states that payment is late once 30 days have elapsed after the customer has received a product/service or received the relevant invoice. You can, of course, agree longer payment terms with your customer under your own terms and conditions of payment. The Late Payment of Commercial Debts (Interest) Act 1998 also states that, if the terms are longer than 60 days, it must be fair to both businesses.
Laws On Charging Interest On Late Paying Invoices
The Late Payment of Commercial Debts (Interest) Act 1998 gives creditors the legal right to charge interest on the debt, once the agreed payment period has elapsed. Under the current rules, you can charge ‘statutory interest’ at 8% above the Bank of England’s base rate. However, if you have a different rate of interest in your contract terms, you cannot claim statutory interest.
Charging Compensation and Reasonable Costs On Late Paying Invoices
In addition to the statutory interest, creditors are entitled to add on to the debt through a fixed compensation sum and their reasonable debt recovery costs of recovering the late commercial debt.
The fixed compensation per invoice currently stands at:
Invoice value less than £1,000: £40
Invoice value less than £10,000: £70
Invoice value of £10,000 or more: £100
If your reasonable debt recovery costs equate to more than these sums, then you are entitled to that greater figure to include in your credit control process and external collection costs.
Taking Legal Action
If none of the above prompts your customer/client to pay, then it’s time that you took legal action. By using a solicitor-led debt recovery service, you are giving your business the best chances of reimbursement. In most cases, debts are recovered in the pre-litigation phase, meaning courts are avoided, and publicity isn’t risked.
Here at Athena Debt Recovery, we pride ourselves in being a cost-effective and efficient system which endeavours to recover your debts as promptly as possible. Through abiding by all debt recover legislations, we give you our promise that we will provide you with a hassle-free solution to your current debt issues.
Through strict training in law and finance practises, we pride ourselves in having one of the highest success rates in the North West. Our rigorous process ensures that we assess your position financially so that we can identify the most effective, high-value solution that always adheres to the Late Payment of Commercial Debts (Interest) Act and Regulations where possible.
Our system benefits your business through a cost-neutral collection that reduces the risk of you losing out on custom and clients. To speak to our debt collection team about recovering money for your business, contact Iain Bould on email@example.com or Tracy Popperwell on firstname.lastname@example.org.
We understand the urgency and importance of your businesses position and cash flow at this moment in time, but with professional guidance and support, we can help end this recession and keep your business at the forefront of its industry.