Thursday 2nd May 2019
Late payment is a real problem for our members. However, there are some useful resources out there to help you 'jog' your client's finance deparments along and some sensible 'good practice' advice to follow:
If a payment is late, you are entitled so claim interest and compensation on the debt from other businesses and the public sector. The rules govern when payments are expected to be made (unless you have given the client more generous terms) and how much you can claim for late payments. These rules do periodically change so do look at the relevant website to get the most up to date information. Below we have outlined the action you might want to take and listed some useful starting places to find out more information:
- Rules on late payments: A good staring point is the Government website, gov.uk. The site also includes a calculator.
- Interest on late payments: Calculated at base (currently 0.5%) plus 8%. The calculation is fee x (8.5%/365) x number of days overdue. There are a number of late payment calculators available to use - just do a quick internet search.
- Reclaim your costs: You can also claim a pre-set amount of debt recovery costs on late payments. Rates range from £40 for a debt of less than £1,000, through to £100 for debts of £10,000 or more.
- Really-simple-to-use Money Claims Online service (https://www.gov.uk/make-money-claim for claims under £GBP10,000; https://www.moneyclaim.gov.uk/web/mcol/welcome for claims up to £GBP100,000) - but you do need a UK address. If you are based abroad and need a UK address get in contact with Lucie who will be able to provide one.
- Small claims court: If you need to take things further, then small claims may be your next move. Information how to go about this is under the link on the right. Quite often the threat of this is sufficient to prompt payment because any small claims process will cost them significant extra cost - send them an invoice for late payment together with a completed small claims court form with a note telling them that you will file it on dd/mm unless payment is made in full. However, if you do decide on this route, you need to be prepared to go through with it ...
- If they fail to respond to this then you can use a Statutory Demand to get the money recovered, the threat is that you can apply to the Courts to have them closed down if they don't pay. For example, you could phone the non-payer up at this point and say "I have the legal power to shut you down as you haven't paid your bill; or would you rather pay your bill". Drastic but it may work. If you want to look at this option, this government site gives some advice on making a court claim
- Its also possible to use a bailiff to deliver a Statutory Demand. He visits the company and delivers it to a director usually in front of the rest of the staff. That’s a powerful tool
There is also formal support availabile in the form of the SBC (Small Business Commissioner) - an independent public body set up by the Government under the Enterprise Act 2016 to tackle late payment and unfavourable payment practices in the private sector. They can help with:
- Resolving disputes and dealing with unpaid invoices
- Checking contracts and getting invoices right
- Calculating interest on late payments
- Signposting small businesses to existing support and dispute resolution services
And finally some advice on simple steps you can take to minimise the risk of late payments:
- Make your terms and conditions of payments clear at outset and include them in your general T&Cs when you bid for work
- Send invoices out on time and include the date by which payment is due
- Make sure that you include all of the required information on your invoice - this may include a PO number, the name/ department of the commissioner, the client's job reference number and name (and make sure you use their nomenactulre) and check where the invoice needs to be sent. Many large organisations have a separate department which may be the other side of the country. This avoids giving them any opportunity to reject or return the invoice to you
- Monitor your payment system so that you are where when payments are due and if/ when payments become overdue
- Send a reminder as soon as a payment becomes overdue (and if this is to a procurement or finance department, consider whether copying in your client may help facilitate things!)