30 Days or 60 Days for Invoice Payments

[CommodoreP]

Looking at
Late commercial payments: charging interest and debt recovery on the government website please can someone confirm what the current law is, and regarding charging late payment fees. It says payment must be within 60 days but then goes on to say the payment is late after 30 days after the customer gets the invoice which makes no sense at all.

Yesterday I heard something about this on the news on the radio about it being 30 days.

As a small business our distributors and suppliers expect payment within 30 days, yet some of our customers are now taking 60 days to pay us which is affecting paying our suppliers. Can I charge customers late payment fees and interest if they do not pay us within 30 days? Or is it 60 days? I am confused.

 

[NickGrogan]

What do your terms say? If they dont say anything, why not?

My old company said 10 days, and charged late payment and interest from day 11.

If you haven't specified a date then the default is 30 days.

 

[CommodoreP]

I specify 21 days, as this means the payment is more likely to be paid within 30 days, but I need to know the law on late payment fees. At the moment the way I read it I cant start charging them now until the payment is over 60 days due.

 

[AlanJ1]

As a small business our distributors and suppliers expect payment within 30 days, yet some of our customers are now taking 60 days to pay us which is affecting paying our suppliers.

Negotiate with your suppliers?

We are a distributor and I have customers on 0 days up to 90 days depending on who and what our agreements are.

 

[NickGrogan]

I specify 21 days, as this means the payment is more likely to be paid within 30 days, but I need to know the law on late payment fees. At the moment the way I read it I cant start charging them now until the payment is over 60 days due.

What makes you think you have to wait?

 

[Mr D]

These customers you are lending money to for 60 days - do you carry on lending money to them?

May be worth tightening up credit given to those. Some of my suppliers you go as late as 45 days the credit account is shut.

 

[Mark Laurie]

We take all payments by direct debit nowadays, when the client signs up with us they know exactly when we will taking the money owed. If they don't pay (or cancel DD we stop providing a service (we are fortunate that running someones payroll gives us a massive stick)!

 

[Mark T Jones]

If you specify 21 days, then you can charge fees from day 22

However, I suggest it would be more practical to tighten up and insigate a proper end-to-end credit control process

 

[Nochexman]

Can I charge customers late payment fees and interest if they do not pay us within 30 days? Or is it 60 days? I am confused.

Far easier to offer a discount for an up front payment.

 

[Lovetts Solicitors]

I think the confusion between 30 and 60 days is because the Late Payment Act says that if you fail to agree terms then the default is 30 days, but If you agree terms then it must normally be within 30 to 60 days unless both sides agree, and even then anything over 60 must not be to the material detriment of one party.

Payment on receipt is not uncommon, or short terms such as 7 or 14 days. On the other extreme many large companies do still try to bully their suppliers into 90 day or more terms, although as mentioned these are highly likely to fall foul of the unfairness test above. The problem is that the big boys know that their small suppliers are unwilling to rock the boat by insisting on their rights.

However this needn't stop you - there are companies that stick to their guns on this, insist on 30 day terms and then when their large supplier inevitably fails to pay on time, adds the relevant Late Payment compensation onto the statement of account to be paid by the supplier the following month. Incredibly many large suppliers do, as the saving from delaying payment by 30 days outweighs the £100 or so penalty they have to pay the next month.

And one final tip - if you have been persistently paid late by a customer and you're ceasing business with them (and thus have nothing to lose) you're potentally entitled to go back through all your old invoices for the previous 6 years and charge that customer for all the Late Payment fees you could have raised at the time; you don't lose the entitlement to claim Late Payment charges just because you choose not to do so at the time. We had one customer who was closing down their business so went back through their books and ended up collecting over £20,000 in Late Payment interest and compensation from their former customers.

 

[Ian J]

What do your terms say? If they dont say anything, why not?

More to the point of you receive written orders from your customers do they specify any payment terms?