Overdue invoice penalty charge

[Spire]

Hi

I have 4 overdue invoices all were due on different dates, they are all for the same customer they are B2B, my question is can I apply the statutary £40.00 penalty for late payment to each invoice ie a total of £120.00 or is it per customer and only £40.00.

Thanks

 

[Cred-X]

Hi Spire,

According to the general interpretation of the Act and Regulations a compensation charge may be levied per order.

So, if each of the invoices relate to separate orders placed over a period of time then you can charge the compensation charge for each one. However, if they all relate to a single order or for an example a maintenance contract then you can only charge the once.

I hope that clarifies the situation

 

[miketombs]

I truly wasn't aware that there was a statutory penalty for late payment. Where can I get details? A flat rate seems a bit broad-brush but logically should apply to each invoice since each late payment is a separate breach. 4 x £40 is £160, not £120. It may not make commercial sense to upset a customer for the sake of a few pounds, but something has to be done to prevent the constant problem of serial late-payers.

 

[Cred-X]

Hi Mike,

You can study the original Late Payment of Commercial Debts (Interest) Act 1998 on http://www.opsi.gov.uk/acts/acts1998/19980020.htm

The act was phased in until the final regulations were introduced on August 7th 2002 and these can be viewed at http://www.opsi.gov.uk/si/si2002/20021674.htm

The Act is a response to the introduction of EU Directive 200/35/EC which made B2B charged interest a statutory legal right and therefore could not be excluded by contract terms.

 

[maxine]

Hi
Debt Recovery Costs can be claimed

• £40 for debts of less than £1,000
• £70 for debts of £1,000 and less than £10,000
• £100 for debts of more than £10,000

More info can be found on business link website http://www.businesslink.gov.uk/bdot...3792175&r.i=1073792173&r.l2=1074453392&r.s=sc

Statutory interest

http://www.hmcourts-service.gov.uk/infoabout/claims/howclaim/interest.htm

The BPPC has a good calculator for statutory and contractual interest
http://www.payontime.co.uk/calculator/contractual.html

 

[Spire]

Hi All

Thanks for your replies, yes it has clarified it, it that I can charge £40.00 for each invoice as they were for seperate items, and thanks Mike for correcting my maths, I am £40.00 better of that I thought I would be if they pay that is.

 

[Calibre Designs]

So Spire, if you get paid, its beers all round champagne even

 

[elaine@cheapaccounting]

Have you already lost them as a customer then? Assume you must have if you are going down this route and I doubt that they would remain afterwards.

 

[welshnoonoo]

How weird is that - I have been thinking about this very thing on the way home from work tonight after having to chase invoices that are from Aug/Sep!

 

[Spire]

Hi

I don't want them as a customer.

These invoices are six months overdue.

I work on the princple that it's cheaper to sit twidling my thumbs if I have no work, than work for someone that does not pay

 

[elaine@cheapaccounting]

And that's fair enough

 

[maxine]

Hi Spire,
Did they give any reason why they havent been paid?

 

[INDIZINE]

As far as I am aware, you must state on the Invoice itself that they are liable for a late payment charge and you must state the details of how many days and the rate you would charge. I am pretty sure you cannot just announce it afterwards. I havent been an advisor for 5 years so Ive lost touch with the exactness of some details but my brother was only just telling me about this at the weekend so that is where my info is from. Google it for the most up-to-date legal requirements.

 

[Spire]

No just the usual the cheques in the post, etc etc etc, then before u know it moths have gone by, and it's only for £200.00 ish and the amount of time that can be expended chasing them is out of all proprtion to the amount of the debt.

So I have decided to put plan B in to operation, which is

Apply the maximum amount of penalties I can under the rules, give them one last chance to pay, the outstanding invoices plus the penalties, by a certain date, then if no payment is forth comming staright into the small claims court, if still no pay than the baliffs, then if all else fails issue a winding up order, as I know they have propety that will get my money back.

Can u tell they have got me a bit upset over this

 

[Spire]

As far as I am aware, you must state on the Invoice itself that they are liable for a late payment charge and you must state the details of how many days and the rate you would charge. I am pretty sure you cannot just announce it afterwards. I havent been an advisor for 5 years so Ive lost touch with the exactness of some details but my brother was only just telling me about this at the weekend so that is where my info is from. Google it for the most up-to-date legal requirements.

I have been in touch with the FSB legal people and they tell me that there is no such requirment on B2B debts, as the law applies reguardless.

So there no problem applying the statutary penalties and intrest charge, and there is no requirement to inform them that I plan to do so as it's on the statute books and as such is my legal right.

 

[RayB]

Have you already lost them as a customer then? Assume you must have if you are going down this route and I doubt that they would remain afterwards.

When I still offered accounts I would have the odd one here and there that went over 60 days - I came to the conclusion that I run a business - If you need an overdraft use a bank - not your suppliers

The point is - we are all generally too tolerant of perpertual late payers (the odd hiccup is to be forgiven though)

Finally - you can charge 4% over base interest on overdue debt - put it in your T&C's

 

[maxine]

shame you cant still have their spend and get the money in. After they pay this time you could take a deposit, set a firm credit limit, and bill them more often? Good luck

 

[Antonia @limeone.com]

You can cover all the costs of collection and interest in your terms and conditions and those are enforceable under contract law. The Late Payment provisions are statute so no notice needs to be provided. Normally having good credit controls in places ensures the prompt payment and good cash flow. Much better to remind before the invoice is due and iron out disputes than lose the client.

 

[elaine@cheapaccounting]

When I still offered accounts I would have the odd one here and there that went over 60 days - I came to the conclusion that I run a business - If you need an overdraft use a bank - not your suppliers

The point is - we are all generally too tolerant of perpertual late payers (the odd hiccup is to be forgiven though)

Finally - you can charge 4% over base interest on overdue debt - put it in your T&C's

Couldn't agree more.

But if you check the post up to this point it was not clear how long the debt was overdue or why. Just thought it was worth mentioning that it would be the point of no return after this.

I must admit I always try to maintain good relations between contacts, prospects and clients whilst recognising the 'break point' when some one just pushes you too far. I know not everyone shares the same values.

 

[Antonia @limeone.com]

We have charged this additional penalty and interest and retain the client. The application of interest and charges is even handed, we apply it to all late payers and it has not been an issue with any of them.

 

[Cred-X]

As far as I am aware, you must state on the Invoice itself that they are liable for a late payment charge and you must state the details of how many days and the rate you would charge. I am pretty sure you cannot just announce it afterwards. I havent been an advisor for 5 years so Ive lost touch with the exactness of some details but my brother was only just telling me about this at the weekend so that is where my info is from. Google it for the most up-to-date legal requirements.

Just to clarify, there is NO legal requirement to state this as part of your terms of sale.
It is a statutory right and so any business can charge another business interest ofor late payment in accordance with the Act. The only categories that can't apply the interest are local authorities, governemtal bodies etc.