Maintaining a steady cashflow is important for any business to continue operating. This is important for Small and Medium Enterprises. Late payments have become increasingly large problem for UK businesses.
Interest
If your contract does not contain specific terms and conditions relating to late payment and interest, then you may have recourse to Statutory Interest.
The Late payment of Commercial Debts (Interest) Act 1998 was introduced to compensate business creditors for overdue payments. The aim is to deter late payments of business debts, but if they are paid late, the supplier is compensated.
The Act applies in business-to-business transactions whether supply of goods and/ or services and where there isn’t any terms and conditions in the contract relating to late payment and interest.
The Late Payment of Debt Regulations 2013 which came into effect on 16 March 2013, Regulation 2 sets out fixed payment periods in commercial contracts when interest accrues on top of the debt.
In the case of businesses, legally statutory interest commences to accrue on late payment from 30 days after receipt of the invoice, the goods or services have been received, or where the goods have been verified and accepted.
Compensation
In addition to interest, you can pursue compensation for each unpaid invoice. The amount of compensation is dependent on the value of each invoice.
The three levels of compensation are:
All businesses should be aware of the implications and entitlements under the Act and Regulations.
