Pay within 30 days - or else what? [BT broadband office]

Pay within 30 days - or else what?

Posted 7 October 2007 at 8:37AM by Simon Dickson in Doing business online

Freelance journalist Guy Clapperton is facing a headache familiar to too many small businesses: an unpaid invoice. And as he rightly points out, the law clearly states that he is entitled to start charging interest on the unpaid debt.

The UK's Late Payment rules, introduced in 1998 and updated in 2002, allow any business to claim reasonable debt recovery costs and a daily rate of interest for an unpaid debt. As the Better Payment Practice Campaign explains, you're automatically entitled to a lump sum between £40 and £100; you then calculate the interest based on something called the 'reference rate' - the Bank of England's base rate on 31 December or 30 June, plus 8%. There's an online calculator to help work out how much you're due.

Of course, it's unlikely to be as easy as that. If you threaten to enforce your right, or if you eventually end up in court, you're unlikely to be doing any work for that particular supplier again. And if we're only talking a small amount owed, you may decide the relatively low level of compensation isn't worth the hassle. It might be a surprise to find a page on the Business Link website explaining why you might not want to use your legal right - but it's sound advice.

There's a whole section of the Business Link website devoted to getting paid on time; and there's also a downloadable guide (PDF) to making use of the late payment legislation. You might also want to consult their guide to invoicing and payment terms.

Tags: businesslink, interest, invoicing, late payment, terms and conditions

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Comments

1. At October 8, 2007 2:05 PM, Ian Jenkins wrote:

In my view exercising your right to interest on late payment will as others have said soon find you without work. Better to negotiate the the Lions share of your payment up front! Ian Jenkins Business Champion East Midlands

2. At October 11, 2007 12:17 PM, Sarah Atkins wrote:

I have found that customers with late invoices respond well to offers of paying the outstanding debt in realistic 'chunks'and that the understanding approach leads to greater customer loyalty. Of course common sense must be applied.

BT broadband office