The vast majority of small and medium businesses in London will incur late paying customers, non-payment from clients and notoriously slow invoice settlers. Many businesses may be unfamiliar with the law but if the business is suffering from clients who are late in paying off invoices, there is a possibility of receiving not only the debt but a small amount of compensation (or late penalty interest). So, you can choose to use late payment collection London services or chase the money up yourself.
The First Step in Receiving Late Payments in London
Create a statement. When a business that owes you receives a statement, it usually fires them into action. The statement should include a date, invoice amount and a brief summary of the work you carried out.
If a business invoice has not been paid, never delay to chase the payment up. Psychologists cite that a debt that is allowed “to wander unchecked over time” matures to the point where the debtor feels they no longer actually owe the cash.
Independent companies and freelancers should be resolute in recovering late payments in London as many clients will claim financial difficulties in an attempt to delay payment. If a company claims to be having financial difficulties, then you should always double check to make sure that business is telling the truth – more often than not it exaggerates the financial difficulties it is really in.
Know the Law
In the UK, there is a law which protects creditors from bad debt and late payments – The Late Payment of Debt and Commercial Interest Act of 1988 was adjusted as recently as 2002 to give the creditor a fixed penalty charge which can be added to the interest accrued from a late payment.
The fixed penalty rates are:
- £40 – if the debt is between £1 and £999.9
- £70 – for debts between £1000 and £9999.99
- £100 – for debts in excess of £10,000
How Much Interest Can I Earn from a Late Payment?
The interest stands at 8 per cent above the Bank of England base rate (as of June 2017 this would stand at 8.25 per cent).
When Does the Payment Start to Tick?
It ticks from the moment you deliver the work, or from the point when your client has received a statement or invoice – whichever is the later. In some cases an invoice can be produced as the work is delivered (usually electronically).
Always end an invoice with a statement that payment is due within 30 days – do not choose your own time frame.