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Late Payment Law FAQs

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SMEs lose millions of pounds every year due to late payment of invoices. According to the Federation for Small Businesses, 62% of small businesses report being affected by late payments at some point or other, with around 50,000 small companies closing each year due to late payments.

SMEs are the backbone of the UK economy, turning over an estimated £2.2 trillion per year. With around 50,000 falling into administration as a consequence of unpaid debts or late payment, the ability for SMEs to manage debtors is vital for the continued growth of the UK economy, as well as for the prosperity of business owners such as yourself, dear reader.

In this article, we answer some of the most common questions concerning late payment law to help you understand your rights and protect your cashflow.

Should I be concerned about late payers?

Absolutely. Once an invoice passes 90 days overdue, you are 50% less likely to be paid. Therefore, it is vital to put measures such as cloud accounting and automated invoice chasing in place to keep track of what customers have or have not paid.

What is the Late Payment of Commercial Debts (Interest) Act 1998 (Late Payment Act 1998)?

The Late Payment Act 1998 provides creditors with the right to charge 8% interest plus the Bank of England base rate on overdue payments for goods or services, plus administrative costs, provided they are fixed and reasonable.

The key provisions of the Late Payment Act 1998 are as follows:

  • As soon as a debt can be classed as overdue, a supplier can charge 8% interest plus the Bank of England base rate on the amount owing. If there is no agreed late payment date, the debt will be classed as overdue after 30 days.
  • In B2B contracts, payment terms for fixed prices may not exceed 60 days from delivery of the invoice or delivery/acceptance of the goods or services – whichever is the latest. Parties can agree to longer payment terms provided they are not “grossly unfair” to the supplier.
  • The fixed price you can charge for late payment administration costs is set by late payment legislation.
  • Compensation payable:
    • £40 for invoice up to £999.99
    • £70 for invoices £1000 – £9999.99
    • £100 for invoices £10,000 and over

Despite the right to collect interest on late payments, research has shown that an estimated 50-80% of SMEs do not charge interest on late payments. The main reasons are attributed to business owners being unaware of their rights under the Late Payment Act 1998 and the reluctance to upset commercial relationships and lose future business.

How can the Debt-Claims Portal help me collect late or unpaid debts?

The Debt-Claims Portal is a highly intuitive, easy to use, cost-effective debt recovery tool. When it comes to collecting late or unpaid invoices, the Debt-Claims Portal will guide you through your debt recovery needs by:

  • Saving time – taking court action to recover a debt can be time-consuming if you are unsure of the process. By using the Debt-Claims Portal you can swiftly issue a claim for a County Court Judgment and keep track of all the steps you have taken before reaching this point (for example, sending a letter before claim). Furthermore, you can be confident that the form you have filed for a County Court Judgment has been checked by an expert in debt recovery and is therefore completely accurate.
  • Controlling costs – the Debt-Claims Portal allows you to control the costs of collecting unpaid debts. For example, you can send a late payment demand for as little as £2.50 and a letter before action for £12.50.
  • Providing you with confidence–the Debt-Claims Portal was created and is administered by fully qualified solicitors. Therefore, you can confidently send correspondence knowing it will be checked by a specialist in debt recovery before it is dispatched.

Final words

Whether you are a business owner or a debt recovery agency, collecting unpaid debts can be frustrating and time-consuming. We remove all the challenges associated with collecting unpaid invoices with our Debt-Claims Portal.

Using the best-in-class technology, our Portal allows users to create an account and upload their details and those of the debtors, including how much is owed, contact details, addresses, and any previous steps taken to recover the debt.

The advantage of the Debt-Claims Portal is everything can be managed through one system. For example, if you need to send a letter before action, you can create it through the Portal. The letter will be sense checked, and sent out on our official letterhead. There is no need to pay for a separate solicitor and we can turnaround letters the same day if received by 11am but mostly within 24 hours.

To access the Debt-Claims Portal, please click here and transform your debt recovery processes.