Interest on late invoices

[Vixpy1]

Whats a fair rate for late invoice payments without prior agreement? Looking at implementing it for our account holders

[marshalla]

Statutory rate is 8% + BoE base rate, with a few exceptions : https://www.gov.uk/late-commercial-payments-intere...

[Vixpy1]

excellent, thanks

[Zoon]

Good look with getting it paid and then getting any further work in future.

[jonamv8]

Zoon said:

Good look with getting it paid and then getting any further work in future.

I think this!!

Anyone ever actually got it, the extra interest that is and continued with future orders?

[bga]

jonamv8 said:

Zoon said:

Good look with getting it paid and then getting any further work in future.

I think this!!

Anyone ever actually got it, the extra interest that is and continued with future orders?

A FTSE 250 client of ours were a year late in paying us. The delay in paying us wasn't caused by the people who commissioned the work and once we had been paid (with interest) we started working with them again and continue to do so. I can imagine that smaller firms would take it personally.

It took starting court proceedings before we got paid the original fee + interest. The interest was less than 8% but in line with what was specified in the contract.

[Don]

jonamv8 said:

Zoon said:

Good look with getting it paid and then getting any further work in future.

I think this!!

Anyone ever actually got it, the extra interest that is and continued with future orders?

Yes. But it was very clear in the Ts&Cs that payment later than 90 days from Invoice date would result in interest charges. Three months is long enough for even the most unprofessional accounts department to process an invoice. Our client dished out a kicking to their own Accounts for us once they knew we weren't getting paid.

I've not sold much to small business, despite being a small businessman myself. If I had a personal relationship with someone and they dragged payment out I'd start by having a word and then escalate.

[Shnozz]

Charlie - this is something I deal with a lot for clients.

As linked to below, 8% + BOE interest rate in accordance with Late Payment of Commercial Debts (Interest) Act 1988.

In addition to the interest you are entitled to a compensatory payment as per Schedule 5 of the act - http://www.legislation.gov.uk/ukpga/1998/20/sectio...

Drop me a message via FB if you need any help with it mate.

[Simpo Two]

Theory and practice are different things. And note that 8%pa is only 0.67% monthly pro rata.

I always paid my suppliers on time, or even early if they did a really good job. But if (theory here because it never happened) I'd had an invoice asking not only for the sum agreed but 0.67% extra because it was a month late, I'd pay the former and tell them to sing for the 0.67%.

[All that jazz]

Simpo Two said:

Theory and practice are different things. And note that 8%pa is only 0.67% monthly pro rata.

I always paid my suppliers on time, or even early if they did a really good job. But if (theory here because it never happened) I'd had an invoice asking not only for the sum agreed but 0.67% extra because it was a month late, I'd pay the former and tell them to sing for the 0.67%.

Easy to say when you're sat on that side of the fence. Now sit on the other side and say the same when your invoice(s) still remain unpaid over 3 months later and cashflow is getting tight. The interest penalty is there for a reason. Play by the rules and it's a non-issue.

[Simpo Two]

All that jazz said:

Play by the rules and it's a non-issue.

And have you successfully enforced this ruse?

Why piss about with 0.64% when you can just sue them for 100%?

[All that jazz]

Simpo Two said:

All that jazz said:

Play by the rules and it's a non-issue.

And have you successfully enforced this ruse?

Why piss about with 0.64% when you can just sue them for 100%?

Because suing is 99% guaranteed to lose the business. Some guy mentioned above they charged them the interest, it was paid and the client is still a client. And no I've not personally had to put it to effect in my business but I'm in the rather fortunate position of having my invoices paid 2 days after submission on 7 day payment terms so it would perhaps be a bit petty to invoke the charge if on the 8th day the invoice was still outstanding. However depending on the value of their business and/or if the client/customer was a royal pain in the arse/awkward etc, I would let the charge stand if I felt they deserved it. After all, there's no point having the clause in your T&Cs if you're not prepared to use it.

I can only assume that you're not in the business of supplying products or services B2B because letting your customers have free reign over when they choose to pay without enforcing late payment penalties is the quickest way to no longer having a business.

[Simpo Two]

All that jazz said:

Because suing is 99% guaranteed to lose the business.

As is insisting they pay an extra 0.64%pcm. Just add it to the next bill, they'll never know and everyone's happy.

All that jazz said:

I can only assume that you're not in the business of supplying products or services B2B because letting your customers have free reign over when they choose to pay without enforcing late payment penalties is the quickest way to no longer having a business.

Yup. Working from my dining table but with a fantastic network of suppliers I supplied products and services to blue chip companies for 25 years. Moral is - choose who you work with.

[All that jazz]

Simpo Two said:

Yup. Working from my dining table but with a fantastic network of suppliers I supplied products and services to blue chip companies for 25 years. Moral is - choose who you work with.

Overly simplistic answer. Just because a given company has paid on time for 'n' does not mean that will continue to be the case, hence why you have provisions in place in your T&Cs. If you don't (as your OP suggests based on what you'd do yourself) or choose not to enforce them then you've been very lucky. It's often the case the so-called blue chip companies are the worst payers as they know that many suppliers rely on them as their only life-line and so are well versed with the "cheque is in the post/the person dealing it is on holiday" merry-go-round.

[akirk]

We take a different approach, we bill out the full amount but offer a 10% discount on hourly rate work if paid within 7 days... All built into the figures, carrot rather than stick, works very well... I get clients wanting to pay early to make sure they get the discount...

[Simpo Two]

All that jazz said:

Overly simplistic answer.

I'd suggest that beleiving you can get another 8%pa is not only simplistic but blindly idealistic.

I spent about £2,000 in 1991 having personalised T&Cs drawn up - but once I started trading and got my 'feet under the table' as it were, I never used them. I realised that my clients also had T&Cs on their POs, and their legal budget would be thousands of times greater than mine, and in a fight I'd lose very much more than the job was worth.

The nice thing about working with proper companies/corporates (as opposed to 'dining table dreamers' or egotistical MDs) is that once you have a PO, and assuming you've done the job properly so you have a happy client, you get paid. It may not be on the date printed on my invoice, but I was sufficiently astute, being a sole trader and never knowing wher the next job was coming from, to operate wth a large cash buffer. Typically they paid at the end of the month following the date of invoice, so on average 3-6 weeks, and that was fine. I paid all my suppliers first so when the big cheque came in it was all mine

I had two bad debts, both from dining table dreamers who were essentially just bandits, only about £300 each. One got a CCJ added to their collection (not worth enforcing); the other was just a bankrupt liar so I wrote it off. Amusingly he later called me and asked if I'd give him a credit reference!!

Moral is - choose who you work with. Oh, and keep a cash reserve, so you don't have to stress over how to make them pay an extra £3.25.