Interest on Late Payments

6. How to Claim Interest

If you decide to start charging interest on late payments, you need to make provision for it as part of your routine credit control system.

Even if you do not usually intend to collect interest, draw attention to your rights in a revised 'terms and conditions' statement. It may encourage customers to start paying on time.

6.1 Notify each customer in writing. State that you will charge interest on late payments as you are entitled to do by law.

• Contact habitual late payers to discuss how the system will affect them. Explain that their late payments cost you money.

6.2 Ensure that your customers understand and agree to your payment terms.

• State the agreed payment date on each of your invoices.
• The invoice should clearly state your new terms and conditions, and that you intend to exercise your right to charge interest on late payments.

6.3 Inform customers when interest begins to accumulate. Give the following information:

• The original invoice number.
• What account the bill is for.
• How much is owed.
• The extra amount of interest the customer will owe you each day.
• To whom the payment should be made.
• Payment instructions.

6.4 Present the customer with a final bill once the interest and the original amount that was due have been paid.

• The final bill should specifically mention the number of days that interest has been charged for and the base rate that was used in calculating the interest.