Businesses which are pursuing late payments are being reminded they can also claim interest and compensation to cover the costs of collecting the debt.
Earlier this year, research from Bacs Payment Schemes revealed late payments leave SMEs with a bill of more than £2billion every year. This can be a real issue for businesses, particularly smaller companies.
Sharon Walker, debt recovery manager at regional law firm Napthens, warns that businesses should not be afraid to claim compensation if they are affected by late payment.
She explained that the Late Payment of Commercial Debt (Interest) Act 1998 was introduced to deter late payment and compensation creditors. It applies to the commercial supply of goods and services.
Sharon said: “If a bill remains outstanding, under the Act a creditor is permitted to claim interest and compensation to cover their reasonable costs of collecting the debt.
“Interest can be claimed at 8 per cent over the Bank of England’s base rate together with a sum of between £40-£100 per invoice. It can be claimed when, if there is a contract in place, there is no current provision for interest on overdue invoices.
“There is no need to raise an invoice for the interest, compensation or costs, but it is prudent to write to your customer to advise them about the additional costs you are seeking to claim.
“Many customers use it as an integral part of their payment terms and as such it should not jeopardise existing customer relationships, something which may be a concern for some businesses.”
For more information or help on the above, please contact a member of our Debt Recovery team.