HOW TO CHARGE FOR LATE PAYMENT

Ensuring your customers pay their bills on time can be difficult. Late or non-payment of debts can cause cashflow problems and even force you out of business. In a bid to encourage prompt payment among UK businesses, the law now deters customers from paying late by allowing you to charge debtors interest on late payments if you wish.

You can also claim reasonable debt-recovery costs.

FOLLOW THE RULES 

To ensure your best chances of getting paid on time there are a few simple rules to follow, such as:

• Agree on terms of payment at the start of all contracts
• Monitor your payment system regularly for timely payment of invoices 
• Have a good system for clearing disputes quickly 
• Foster good relationships with suppliers by informing them of your payment procedures and who is responsible
• Promote healthy cash flow in both directions with an efficient collection of your own sales

LATE PAYMENT LEGISLATION 

The late payment legislation allows you to claim interest on unpaid invoices at 8% over the base rate and reasonable debt recovery costs. For more details, you can visit the gov.co.uk website.

The compensation entitlement varies in accordance with the size of the debt: 

Size of unpaid debt -- Sum to be paid to the creditor

Up to ￡999.99 -- ￡40.00

￡1,000.00 to ￡9,999.99 -- ￡70.00

￡10,000.00 or more -- ￡100.00

Although the legislation precludes companies from framing their contracts to get around it, firms that are determined to pay late will continue to try to enforce terms on their suppliers.

For that reason, small and medium-sized enterprises can ask a representative body to challenge grossly unfair contract terms used by their customers which do not provide a substantial remedy for late payment. This may involve the representative body going to court on your behalf.

It is advisable that you think carefully before deciding to pursue the debt through the court and that you

If a judgment is obtained, it may be necessary to take some enforcement action. Such action may include an application for an order to obtain information from a judgment debtor, a third party debt order, or instructing the Court Bailiff or the Sheriff.

An order to obtain information from a judgment debtor brings the debtor before the Court to be examined under Oath, by the Court. A third party debt order is a way of obtaining the money that is owed to you. If the debtor has money in a bank account, or a building society, the bank or building society can be ordered to pay the money over.

More on Dispute Resolution & Debt Collection

You can find more information about tackling late payment here: www.ckelaw.com