Is late payment from another business causing you cashflow issues?

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Is late payment from another business causing you cashflow issues?

Unpaid or late payments can have considerable impact on your business. It is important to be aware of your rights over late payment of commercial debts, how to calculate interest and if you can claim compensation under the Late Payment of Commercial Debts (Interest) Act.

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?

 

We have the expertise you need to pursue outstanding invoices. Our letters before action can include late payment interest and compensation pursuant to the Late Payment of Commercial Debts (Interest) Act 1998. If you wish to discuss any aspect of Debt Recovery, please contact Gina.

The content of this webpage is for information only and is not intended to be construed as legal advice and should not be treated as a substitute for specific advice. PDT Solicitors LLP accepts no responsibility for the content of any third party website to which this webpage refers.

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