Do you charge interest to your slow payers?

Where the right to charge interest to late paying customers is not stipulated as part of a commercial contract there is a statutory provision to charge interest to late payers.

Under The Late Payment of Commercial Debts (Interest) Act 1998, as amended and supplemented by the The Late Payment of Commercial Debt Regulations 2002 a creditor can charge their commercial debtor interest.  Interest is charged at what is called the "reference rate" this rate alters depending upon the current bank rate, it is set twice a year and it is currently 8½%.

To calculate the interest due from your debtor use the following equation:

Invoice value X 8.5% (current reference rate) divided by 365 to obtain the daily rate per invoice.

Then multiply the number of days the invoice is overdue by with the daily rate to give you your total, your are entitled to charge interest up until the date the payment is made.

Under the same legislation, if you have to take the step of passing the debt out to a commercial debt recovery agency you are entitled to charge Statutory Compensation.  Statutory Compensation is charged on a sliding scale depending upon the debt value:

Debts up to  £999.99 - fee of £40.00 is chargeable
Debts of £1000.00 up to £9,999.99 a fee of £70.00 is chargeable and on debts over £10,000.00 a fee of £100.00 is chargeable.

Good commercial debt recovery or commercial collection agencies such as Creditserve Collections will automatically add these additional fees to your outstanding account and pursue them for payment as well as your overdue sales ledger balance.

For more information on commercial debt recovery, credit control procedures, collection of overdue accounts and credit management advice please go to our website at www.creditserve.co.uk or contact us on 01992 414222