A Two Minute Tuesday Video
In the current climate it seems that more customers are hanging on to their cash and taking longer to pay. This is obviously great for them – but not so great for you. You’ve delivered your goods or services and invoiced them in accordance with your agreement so the payments should be on time.
Even if you don’t have provision in your contract around late payment, there is legislation that can help you. The Late Payment of Commercial Debts (Interest) Act 1998 and it’s successor EU Regulations are there to give you right to claim interest and debt collection charges for anything that’s overdue.
I would suggest that in the first instance you check your contract to see if there’s any there about what you can do if payments are late.
If you have got relevant wording, stick to that part of the agreement when chasing your debt. If you don’t have any relevant provision in your contract, visit payontime.co.uk which is a site set up to help you calculate how much interest and what late payment charges you might be entitled to invoice your client to get them to pay up.
If they’re not paying the invoice, why would they pay any interest on top of that?
The fact is you can use the information gleaned from that site as an excellent negotiating technique. Most Accounts Payable deparments will do anything they can to avoid being invoiced for late payments. Not least of all because this invoice won’t be set off against a purchase order which can cause all sorts of problems internally.
If you’re in a position with an overdue invoice and your chasing, emailing and polite phone calls haven’t done the trick, my suggestion would be to email your customer:
“As you’re aware, you are currently accruing interest on this debt at the rate of 8.1% above rate and this means you currently own £xxxxx. Interest is accruing at £xxx a day. If you pay our invoice in full by (date), then we’ll waive our right to charge interest and debt collection fees. Otherwise we will be issuing you an invoice for the full amount.”
It’s often just that little nudge they need to get them to settle the invoice. Remember that this is money they owe you. You’re not asking for favours here. They are basically using you as and interest free credit source. Like your client, you too have bills to pay and wages to settle.
If you’ve had any problems with getting paid and you feel that the correct provisions in your contracts would help, do get in touch for a free chat with one of our experienced consultants and we will be delighted to help.