What Costs Can I Add onto a Debt ?
We understand that it’s hard enough to build and maintain a business, without having to fund your clients business too!
Corp & Comm deal with many small business owners who are effectively providing interest free loans, in the form of late payments. So we’re often asked:-
“What late payment interest can I add onto a debt ?”…
“Do I need to mention costs in my terms ?”…
“Are there other fees or penalties I can apply ?”
Here is our advice
You are entitled to add costs and interest on any legitimate business to business debt.
Irrespective of whether your terms and conditions state that you can or indeed will. Government legislation allows you to add three basic additional costs :
- Late payment compensation – Set at £40, £70 or £100 depending on the value of the debt.
- Late payment interest – Calculated at 8% above the current Base Rate.
- Reasonable debt recovery costs – Usually around 10% of the total debt value.
Terms & Conditions
We always advise that your terms and conditions should make reference to your entitlement to add allowable costs to any legitimate, unpaid account. However you must ensure that these costs are reasonable and not excessive.
As a result, we advise you use the above guidelines as your basis to additional costs. You may well feel that you should be adding more but the challenge is that the more excessive your demands become, the less likely you are to be paid.
A simple addition to your terms along the lines of…. ‘Whenever there is a payment delay upon a legitimate invoice and our agreed payment terms are exceeded, we reserve the right to charge all allowable late payment costs, as per Government legislation, found within the Late Payment of Commercial Debts Interest Act.
If you have additional questions or would like help with recovering late payments please get in touch.