Unpaid invoices: surcharges for late payment

[shirepro]

I recall legislation going through that allowed small businesses to charge a % fee to larger companies who fail to pay on time (something lke 2% over base rate?). Does anyone know where I can find the legislation, or what conditions apply (e.g. what is a small business, who can they chrage etc). Does it apply to loca and national Government too?

I want to put the charge into our terms and conditions, as I am fed up with chasing people. I think such charges would sharpen their mind. I know they will pay and don't want to get heavy with them but if they don't have some incentive things drag on and on, and I spend my time chasing.

[Fatboy]

My dad always used to offer a 5% discount if the invoice was paid by a set date, and cost it out accordingly. Worked pretty well...

[Eric Mc]

It's always been the case that businesses could impose penalties and interest on late payment. However, it would be normal practice to inform your customers in advance that this was your policy with late payments.

[simpo two]

It's another example of Government not having the faintest idea of what running a business is really like.

'Dear Customer, as you've taken 5 weeks to pay instead of 4, pleaes find enclosed our invoice for another 2%'.

Frankly, it's bollox. They will either laugh or find another supplier.

[Phil Dicky]

simpo two said:

Frankly, it's bollox. They will either laugh or find another supplier.

If a customer slips over 30 days,I'll make a little phone call to nudge them along.
But charging them another 2% plus for late payment what a sh1t idea. My customers would be well happy, whilst finding my competitors phone number.....

Phil

[arcturus]

Google for 'Late Payment of Commercial Debts (Interest) Act 1998' and you will find loads of info. Currently the statutory interest rate is 8% above the Bank of England base rate giving you a figure of 12.75%.

[shirepro]

I found the legislation. As detailed above, it is 8% above the reference rate (4.75% until the end of June and reviewed every 6 months), and a fee for chasing depending upon the value of the invoice (£40 typically). Still not clear if this applies to Govt. They can't really object if it was the DTI who pushed it through. It was a 1998 act which has since been incoprporated into the EU legislation. Designed to protect small businesses ( under 50 employees). It suggests it doesn't have to be in contracts or terms of business but that best practice suggests it should be in TOB and as a minimum the client should know the fact when they are invoiced.

I don't think my customers would have any objection (all our tardy payers are Govt. departments after all), as long as they knew the terms in advance. We are adding a note to our invoices pointing out the legislation and suggesting we MAY use it for tardy payment. May sharpen their mind and get them to submit it to finance for payment. My financial year stated in December 2004 and at present we have half of our turnover outstanding. Can't be tolerated.

We always have problems with the first invoice while they get us on the system etc, which I can understand but the usual suspects always claim to have not received/lost the invoice. Oddly it is always the very small invoices (<£30) and the large ones (>£5,000) which go unpaid. I think they feel the small ones ain't worth the bother or are paid from their daily/petty cash account, and the big ones are best left in their bank as long as possible.

Nice idea about offering discount for prompt payment but I think they would think we were putting up prices, and it may cause havoc in our accounting system.

Nice tip with central govt. is to sell them training just before the £ year end, as it is one of the few things they can pay in advance for, so if they have spare cash at year end they are inclined to spend some of it (they can carry forward alot more these days).

Thanks for the tips.