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Interest on Late Payments
All businesses have a legal right to claim interest from late-paying customers.
The statutory right to interest and compensation, introduced under the Late Payment of Commercial Debts (Interest) Act 1998, applies to all contracts agreed after 7 August 2002. Late payments create cashflow problems and expose businesses to the risk that they will not be paid. This briefing covers:
- What rights you have to charge interest.
- How to decide whether or not to claim statutory interest.
- How to calculate how much interest to charge.
- How to claim what you are entitled to.
- The contractual agreement must provide a 'substantial remedy' if the customer pays late.
- The customer cannot impose unfair terms: for example, an excessively long credit period or a very low interest rate on late payments.
- In the absence of any specific payment terms, the statutory right will apply.
Labels: Cashflow Management, Getting Paid
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