Late payment fee

[einarp]

Hello,
wonder if someone knows what the rules are for late payment fee? I would like to introduce a fee, but I guess there are limits to how much etc.

 

http://www.payontime.co.uk/legislation/legislation_main.html for info - there are rules on what you can charge.

 

[Antonia @limeone.com]

You can actually charge more by way of interest in a contract than allowed by Statute providing you detail it in your terms and conditions and make sure it is reasonable.

 

[Spiritus]

Hi

I've had 10 yrs experience in credit control in a B2B environment. If you need any help in recovering debt then drop me a line.

My own opinion about late payment charges is that, although it is legal to do so (providing you follow correct procedures) , it can drive a wedge between yourself and your customer threatening future business. Think carefully about using this tool as I've always found it to be something of a last resort.

If your credit control policies are effective then severely late payments shouldn't be an issue.

What are your payment terms ? Most companies will pay "late" so there is generally an accepted degree of lateness.

If you are trying to establish more prompt payment from your customers then you could establish an early settlement discount of 2.5%. Depending on your costings you could even increase your sales price by the same margin to ensure you do not lose out even if they do pay early.

 

[Admiral Collections]

Recruitment Spiritus or a Debt Collection Company? or QVC channel supplier?

Anyway, good advice by Plain Text and Antonia at Lime One.


Applying interest can be an excellent threat, just make sure you state clearly on correspondence that you are exercising the right to apply the interest under your T & C's which you will need in place in order to be able to carry the threat out in the first place.

T & C's see Antonia, any collection, see me!

www.admiralcollections.com

Testimonials on there which could be of interest

Nic

 

All my invoices have a note at the bottom saying late payment incurs interest and compensation under the Act so all my clients are forewarned on receipt of the invoice. I've twice come very close to invoking a claim but usually a second invoice marked Overdue in red does the trick.

 

[Spiritus]

>Recruitment Spiritus or a Debt Collection Company? or QVC channel supplier?
Anyway, good advice by Plain Text and Antonia at Lime One.

Er excuse me Nicola (Admiral Collections) ! Have I ever done or said anything to you to warrant your cynical reply above ??

Why are you mocking me ?

Somebody asked a question and I answered it based on my own experience in credit control for the last 10 years. I'm not hoping to make any money on the back of it-please note there is NO signature on my profile linking to a debt collection agency. I was just trying to offer advice on Einarp's question and he/she is welcome to take it or leave it.

My post on recruitment was just in response to someone else's post about them noticing plenty of jobs for recruitment consultants. Again, my post was innocent and free of any commercial links. Am I not allowed to express an opinion ?

My post on QVC was an open question as I used to deal with them a few years ago and noticed I had never seen the topic of selling to TV shopping channels mentioned on this board.

Now that I have unneccesarily explained myself perhaps you can tell me if you are the sole authority on credit control matters on this board or can I post messages without having to read your critiques and cynicism in future?

 

[Admiral Collections]

Deary me, feel free to post what you like, it would have just been easier that you took the matter direct to the forum as opposed to wasting my time via emails asking me what my problem was with you. Fact is, I don't have one, I was just responding honestly as I always try to do. Sorry if I offended you and brought out your sensitive side. Sensitive sides in debt collection don't work by the way.

Nic

 

[Spiritus]

I did take the matter direct to the forum but you didn't reply (until today) hence my email.

The fact is your response to the original poster opened up with a cheap shot at trying to discredit me. Your remark came out of the blue and was out of context to the question posted by the author. The only motive I can think of is that I tried to help someone with some credit control advice and you felt I was treading on your toes. Don't be so caustic in future, I've no intention of taking bread from your table and I don't need to "skim" business forum sites to drum up business. Credit control was my 9-5 job-it is not what my business is about.

You've misinterpreted my reaction as being sensitive when the truth is I simply have a low tolerance level for rudeness and unwarranted sarcasm.

In debt collection, the aggressive "Rottweiler" approach may be effective in collecting cash from smaller businesses but with an attitude like that you are more likely to damage the relationship between customer and supplier.

If a company wants to collect the debt at any cost then your approach would be the most suitable.........minus your baseball bat.

 

[creospace]

I added a clause about adding 10% to late invoices at the start of this year as a deterrant. I earnt an extra £60 last month and £70 this month by actually apllying the clause. I don't want the money I want my client to pay on time.

I also have an o/s invoice of £38 from last august believe it or not i'm not sure to write it off or persue it on a matter of principle, what makes it more difficult is it's a member of this forum and it was some work my wife did who normally earns next to nothing working for a charity!

Gary

 

[Deleted member 3454]

All my invoices have a note at the bottom saying late payment incurs interest and compensation under the Act so all my clients are forewarned on receipt of the invoice. I've twice come very close to invoking a claim but usually a second invoice marked Overdue in red does the trick.

So is including such a statement on invoices sufficient?

 

[creospace]

I think a threat of this nature must be carried out as a signal that you mean busienss. Otherwise clients just play on the fact you're leanient.

I'd rather teach clients the way I do business but if they want to pay when they want then they pay for the prvialidge.

A simple note at the bottom of yoru invoice i'm sure is enough although I think it should be noted in your terms and conditions as well and then a new version distributed to all your clients.

Gary

 

So is including such a statement on invoices sufficient?

In my case, yes it is. I've only twice had to threaten to invoke the Act. Usually, if an invoice goes 14 days overdue I reissue it in red with an extra line saying the invoice is overdue and must be settled immediately. If it's not settled within 3 business days, I would then start charging for compensation and interest. But I've not yet had to do this. In both cases, the red reminder was sufficient to generate payment. Some companies are just slack with their admin so I do try to make allowances for that, although I don't like it. I'm lucky in that I don't have cash flow problems as I'm a freelance with almost no overheads and I don't have a mortgage or bills either. So I don't feel the pressure as much as others might. This luxury also means I can afford to turn work down if I don't fancy it.

creospace: my T&Cs are on my website and I draw all clients' attention to them. I make 99% of my clients sign a contract anyway, which holds them to the T&Cs.

 

[Deleted member 3454]

Thanks for that.

I have come across the problem of late payment for the first time since I set up my business and will be introducing this to my T&Cs and invoices. I know that I can't apply it to the client with the outstanding invoice I have at the moment, but it will certainly help if ever this happens again.

 

I'd really recommend going down that route. It saves endless hassle later on. I'd hazard a guess that many companies are probably unaware of the Act anyway. Ignorance of the law is obviously no excuse but penalties are much easier to enforce if attention is drawn to the possibility from the off. Note that the Act cannot be enforced against individuals, only companies - not that I ever let this on to my individual clients. The idea behind the Act is to encourage prompt payment.

My wording says:

[FONT=&quot]Please note that late payment is subject to interest charges and associated compensation payment under the UK Late Payment of Commercial Debts (Interest) Act 1998.[/FONT]

 

[Deleted member 3454]

Thank you.

 

[KateCB]

it can be a tough one - I have a persistent late payer....trouble is it is a large, well known, (humongous even) sports company who despite agreeing to our payment terms, AND having an 8% late payment clause on their invoices and statement STILL pay 30 days late at the least.......applying the charge would place me on supplier hold, which means that their business would go elsewhere - which do I want more - the money on time, or the money eventually???? It can be a tough decision some months!
Kate
____________________
Kate Carter-Brown
Managing Director
01226 208464
Http://www.martialdesign.co.uk
A member of the karate Kid Ltd Group
The ORIGINAL online martial arts store
Established ONLINE 1999

 

[Ian J]

So is including such a statement on invoices sufficient?

No - an invoice should be raised after the service has been rendered or the goods delivered and you shouldn't be applying terms & conditions "after the event".

To be binding, the terms & conditions should be exchanged before the goods have been delivered, ideally in an acknowledgement of order so that your customer is aware of the terms on which you are willing to supply.

 

[Admiral Collections]

Kate

Your problem is not uncommon. The FSB recently ran an article re: Halfords. They are insisting that their suppliers accept 90 days as credit terms or they will be removed from the suppliers list.

In this situation all I can advise is that you ensure you are chasing payment from the person who is responsible for raising the cheque and try and charm your way in. Used to work for me when I was a Credit Manager

 

[Arhiann]

Thanks for that.

I have come across the problem of late payment for the first time since I set up my business and will be introducing this to my T&Cs and invoices. I know that I can't apply it to the client with the outstanding invoice I have at the moment, but it will certainly help if ever this happens again.

The late payment act means you don't even need to quote interest on your invoice. It's enshrined in law.

http://www.payontime.co.uk

It's still recommended that you quote it, but there in practive there's no need. You can even go back through your sales ledge and charge it to everyone who has ever been late, though you'll lose custom that way.

Your supplier can't even step out of it by applying T&C that exclude that act as the Late Payment Act specifically states that there has to be some kind of measure to counter late payment.

Rob

Rob

 

[bwglaw]

No - an invoice should be raised after the service has been rendered or the goods delivered and you shouldn't be applying terms & conditions "after the event".

To be binding, the terms & conditions should be exchanged before the goods have been delivered, ideally in an acknowledgement of order so that your customer is aware of the terms on which you are willing to supply.

Ian makes a valid point although in some cases it is sufficient especially if there has been some dealings in the past i.e. late payment interest clause stated on previous invoices, then it can be argued that sufficient and reasonable notice has been given for the clause to be incorporated into the contract, thus making it enforceable.

It would be difficult to enforce against a new client who may not be immediately aware of your terms. However, it can be argued that if your invoice merely states 'payment within 30 days' then the Late Payment of Commercial Debts (Interest) Act 1998 and the Late Payment of Commercial Debts Regulations 2002 sets out, amongst other things, any fixed sums you can charge on a late debt.

It is good practice to ensure you include your late payment interest charging structure in your terms of business and ask each client to sign a copy. This will form a contract.

 

[pasquin]

Hi,

You can get round the whole issue by getting a factoring facility - then you won't spend lots of time you could be earning money chasing late payments. I use LloydsTSB - ltsbcf.co.uk

 

[creospace]

I threaten with taking the site down and replacing it with a big page saying it's taken down because the owner hasn't paid the bill.

Often does the trick