Recover interest on your debts
Many businesses lose out because they do not claim interest on late and unpaid debts. You have a right to interest and you should claim it.
There are two types of interest you can claim. these are contractual interest and statutory interest.
Contractual interest
You can include a clause in your contracts and your terms & conditions stating that you will claim interest on any late or unpaid invoices. The rate cannot be excessive but it can be higher than the statutory rate. If your client or customer fails to pay then claim the contractual rate of interest. Write to them and state the amount outstanding on the unpaid invoice and show the amount of interest due. You can claim the interest from when payment was due until payment is made.
Statutory interest
Under the Late Payment of Commercial Debts (Interest) Act 1998 you can claim statutory interest on late and unpaid debts, even if you did not include a contractual interest clause in your invoice or terms of business. Interest runs from when the debt fell due for payment until the debt is paid. Interest is the Bank of England base rate together with a statutory rate that changes every six months. Claim the interest rate that was in force on the date the payment fell due. Interest will continue at a daily rate on all outstanding sums until you are paid. Again when payment becomes due write to the debtor and tell them what is outstanding, what the interest rate is and how much interest is per day.
Recover fixed costs
Under the Late Payment of Commercial Debts Regulations 2002 you can also charge a fixed sum for the cost of collecting the debt. The amounts are small but you are entitled to be compensated for the inconvenience. Currently the amounts are £40 on debts under £1,000. You can charge £70 on debts between £1,000 and £10,000 and on debts over £10,000 the sum is £100.
