A recent report from Siemens Financial services has revealed that late payments are costing UK SMEs £250 billion pounds worth of liquid cash flow. This reveals the extent of the ongoing problem of late payments which can in some cases cripple businesses with cash flow issues which can result in insolvency.
With cash being the lifeblood of a business any interruption particularly from a large customer can be detrimental to the survival of a business which is why The Late Payment of Commercial Debts (Interest) Act 1998 was introduced. This act was aimed at discouraging late payment by providing the means for creditors to seek compensation.
So as a business owner supplying goods and services commercially you can and should claim late payment interest and compensation under the following conditions:
You supplied goods and services
Your customer purchased your services or goods for business purposes
The contract you have with your customer was not governed by a consumer credit agreement
Sometimes business owners are mistaken in thinking they don’t have the right to claim interest and compensation, however if they have failed to pay you on time this counts as a breach of your payment terms.
It is advisable, however, to explain in your invoice that interest and charges may be added if payment isn’t made on time.