According to published research, over three quarters of UK businesses suffer from late and non-payment of invoices. The same research found that an astonishing 76% of businesses are being affected by late payments of up to 6 months beyond agreed contract terms.
It was also revealed that in companies suffering from late and non-payments:
The effects of late payment can be extremely detrimental to the economic health of a business and its owners.
For a company suffering in this way, there is legislation available to help you. While consumer debts are monitored via external bodies, commercial debt has its own act. This act is designed to assist businesses receive compensation if agreed payments aren't made.
The Late Payment of Commercial Debts (Interest) Act 1998 was introduced to compensate creditors for the late payment of debt (and deter late payment). It only applies to the commercial supply of goods and services with no provision for interest in a company's terms of business.
In brief, it enables you to claim interest and compensation for invoices that are not paid on time. You can claim late payment interest and compensation if:
You don't have to tell your customers that you will claim late payment interest or compensation if they fail to pay on time before they have actually breached your payment terms. However, it may be beneficial for your cash flow to tell them in advance of your intentions, should payment be made late. You could put warnings to this effect on your invoices; your statements and in your terms of business.
What can I do?
Non paying debtors can cripple a business, particularly SMEs requiring smart balancing of their books. The act of chasing debt can also be time consuming and stressful. Often with SMEs this will be down to a Director, Financial Officer or other higher ranking staff member. This can be detrimental to the day to day running if multiple debts need chasing.
AYOM Collections, like many recovery firms, has dedicated staff able to calculate all relevant compensation and fees for your debts. Late interest percentages and invoice compensation are all taken into account when we calculate a final cost to the debtor.
If you would like to speak to somebody about how the act can repair the damage of late payments, call one of the AYOM team on 0800 130 3357 for more information. We have the previous knowledge to help explain how the legislation helps and what role we can play in relieving you of the worries of collecting.