Is late payment of invoices threatening your business?
Cash flow is key to a successful business and if invoices are being paid late – or not at all – you can soon find yourself in trouble.
Recent research by insolvency trade body R3 – found that almost a quarter (21 per cent) of Midlands businesses are waiting for payment of invoices that are more than 30 days overdue. This figure appears to be in line with the situation in other UK regions, and R3 believes that late payment is a major factor in around 20 per cent of all corporate insolvencies.
An R3 survey in April this year revealed that Midlands businesses had 18 per cent of all their invoices paid late.
Quoted in a recent article by the Greater Birmingham Chamber of Commerce – R3 Midlands chairman Richard Philpott said: “R3 recognises that the Government is keen to make an impact on late payment with new guidelines and business campaigns, but progress has been slow over 2014 and 2015. A stricter and more effective line needs to be taken.”
But, while we wait for Government action to address the late payment culture that is hampering business growth, there are steps that your business can take under current legislation.
What can I do if my invoice remains unpaid?
If you provide services to a customer, invoice them, and the invoice is not paid on time you are legally entitled to claim both interest and compensation.
According to The Late Payment of Commercial Debts Act (1998), businesses, organisations and enterprises of any kind are entitled to claim statutory late payment interest, an administration fee, and legal recovery costs from the debtor when an invoice is more than 30 days overdue.
This legislation can reach back for up to six years. So if you had late paid invoices, even though they were eventually settled, you can still charge that former client for the interest and compensation charges you are owed on each invoice.
The level of interest is currently set at 8.5% per annum. The fixed amount you can claim for each unpaid invoice is a minimum of £40. This can rise up to £100 in the case of invoices for larger amounts.
What could the interest and compensation on a late invoice add up to?
If you had a client who paid a £10k invoice six months late you would be entitled to claim the £100 administration charge plus interest from the due date to the date of actual payment of 8.5% per annum. If this same client was late in paying 1,000 similar invoices there would be a potential administration charge of £100k plus interest and also a potential to have your legal costs paid in full. If they ceased to be a customer you could then retrospectively seek to recover your rightful claim.
How can Else Solicitors help?
Else Solicitors has an experienced debt recovery team, which works with clients across the Midlands and throughout the UK to help recover written off invoices, overdue invoices and any money owed to your business or organisation.
Head of Debt Recovery Rachel Greenway said: “We are always happy to take a look at potential cases, free of charge and without obligation, in order to give you an honest assessment of the likely outcome. We know that even a business with thorough and robust financial systems may sometimes need to resort to legal action to recover debts.
“In all our work we recognise the importance of our client’s relationships with their customers, so we will always try to help you retain the business of late-paying customers while getting them to settle their debts on time.”
Partner Chris Else said: “We have worked at a senior level dealing with debt recovery and credit management in companies of all sizes and across all business sectors. Our specialist debt recovery team really understand how business works and what finance directors and managers need, which is why we achieve such high success rates in reducing debtor days and improving cash flow.”
To speak to one of our debt recovery team, based in Burton on Trent, call 01283 526200.
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