Is late payment from another business causing you cashflow issues?

When does a payment become late?

You can claim interest and debt recovery costs if another business is late paying for goods or services.

If you don’t have agreed payment terms, the law says the payment is late after 30 days for public authorities and 60 days for business transaction after either:

• The customer gets the invoice
• You deliver the goods or provide the service (if this is later)

Interest on late commercial payments

The interest you can charge if another business is late paying for goods or services is ‘statutory interest’. This is 8% plus the Bank of England base rate for business to business transactions.

Check the current Bank of England base rate and previous rates

Example

If your business is owed £1,000 and the Bank of England base rate is 0.5%:

• The annual statutory interest on this would be £85 (1,000 x 0.085 = £85)
• Divide £85 by 365 to get the daily rate of interest: 23p per day (85 / 365 =0.23)
• After 50 days this would be £11.50 (50 x 0.23 = 11.50)

Compensation

The following is a breakdown of how much compensation you can claim under the Late Payment of Commercial Debts (Interest) Act:

• Up to £999.99 - £40.00 per invoice
• £1000 to £9,999.99 - £70.00 per invoice
• Over £10,000 - £100 per invoice

What next?