Charging companies interest on late payments

This post only relates to the UK, I’m afraid.

It’s a fact of life in this country (and probably all over the world) that many companies try to save themselves a little money by paying small businesses late. This has happened to me recently and it’s not nice. Always at the back of your mind is the thought that the debtor could go out of business and you could lose alot of money.

But, fear not! Help is at hand. The Late Payment of Commercial Debts (Interest) Act 1998 gives small businesses the statutory right to claim interest on late payments from other businesses. This means you can charge them 8% above the Bank of England base rate (currently 5.5%) on everyday after 30 days from the date of your invoice.

Here’s the bit where you feel like you’re back at school. To calculate how much you can charge the debtor you have to multiply the amount by the interest rate (so at the moment that would be 13.5%) multiplied by the number of days late divided by 365. Fear not! Help is at hand! Enter the figures here and let the computer do the maths!

Basically debts of £1000 over 2 or 3 months late or more would be worth invoicing. Obviously, it depends on the client, there are some I really want to keep and don’t want to annoy! I have just put in an invoice to a debtor for £60 (120$US) which is better than a slap round the face with a wet kipper (as my Mum would say). I’ll let you know how I get on.

Thank you ContractorUK for this post which led me here.