The answer is yes. A payment becomes late at different times depending if you agree a payment date or not. If you agree a payment it must usually be within 30 days for public authorities or 60 days for business transactions. If there is no agreed payment date late is 30 days from the point either the customer gets the invoice or the good/service is delivered/provided.
Once the payment is officially late you can charge statutory interest of 8% plus the BoE base rate (currently 0.75%) as long as there is no specified rate of interest in your contract. A business can only be charged by yourself once per payment. So per £1,000 payment you can charge £87.50 if it meets the latest criteria.
There is also a fixed business sum that may be charged on top of this interest. These are determined by late payment legislation and depend on the debt amount.. Fixed sum details can be seen below:
|Amount of debt||What you can charge|
|Up to £999.99||£40|
|£1,000 to £9,999.99||£70|
|£10,000 or more||£100|
Under new rules, debtors will have to pay interest and reimburse recovery costs of creditors, if they do not pay for goods and services on time.
Generally it seems sensible to think of the worse case scenario when entering into an agreement with a new company or even an existing debtor. Make sure you agree payment terms and that they are sensible and fair to avoid any nasty disputes that can use up extra time and money.
Further details on official payment legislation can be found here.
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