The late or non-payment of commercial invoices is a major worry for most companies. Sending a late payment interest notice from a solicitor can sometimes help to achieve prompt payment. The notice is a formal demand for payment and is good business practice, hopefully helping you to retain your profitability when your cash flow is not gaining bank interest or reducing your overdraft.
You can claim late payment interest and compensation if:
If we cannot send a late payment interest notice, a letter of claim can be sent in the alternative (for example if you have a contract which allows for a higher rate of contractual interest for late payment).
The Late Payment of Commercial Debts Interest Act 1998 allows you to claim:
|Size of Unpaid Debt||Compensation|
|Up to £999.99||£40|
|£1000 to £9,999.99||£70|
The additional interest and compensation payable should give the debtor incentive to pay you ASAP.
If no payment date was stipulated, you should wait a minimum of 30 days from the date the goods are delivered, or service performed before instructing us to serve a notice.
We advise that you should consider carefully your position before claiming interest and compensation as you don’t want to antagonise your existing customer relationship if you wish to retain the debtor as a customer.
You should state on all written correspondence and verbally advise your customers of your right to charge interest and claim compensation if they fail to pay in accordance with the agreed terms. We suggest the following:
“We understand and will exercise our statutory right to claim interest and compensation for debt recovery costs under the late payment legislation if we are not paid according to the agreed terms.”
You have 6 years to pursue your debt. The 6 years for claiming interest and compensation run from the date the invoice became due. However, we believe that the sooner you demand payment and act the better your chances of obtaining payment.
When your debtor receives a demand for late payment interest and compensation they will look for any way of not paying it. Therefore, you must ensure that your invoices are accurate to prevent amended invoices being required and deal with any complaint swiftly.