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With only glimmers of a recovery on the horizon, Lovetts, one of the UK’s leading debt recovery law firms, is urging businesses to exploit their right to charge interest and claim compensation on late payment. Just 37% of all claims issued by the company on behalf of its customers currently have late payment interest and/or compensation applied*.
Charles Wilson, Chairman and Managing Director of Lovetts says: “In Q1 2008 only 31% of our activity had late payment interest (LPI) applied, in Q1 2009 it was closer to 37%. This is certainly encouraging but clearly there is still much work to be done in encouraging more businesses to claim compensation and interest and thus adopt this effective deterrent against persistent late payment in to their credit control procedures.
“The fact is, the use of late payment interest has taken a long while to be accepted by many companies. Ignorance of the legislation, how it can be adapted by individual companies and a fear of alienating clients, may be partly to blame and inevitably it is the micro SMEs that are most affected.
Lovetts has put together a quick overview on Late Payment Interest and Compensation for businesses to consider:
Compensation
• Compensation can be claimed for every invoice that was not paid within the credit period.
• Compensation can be claimed even if the invoice has now been paid.
• Businesses have up to 6 years to claim the compensation.
Late Payment Interest and Compensation:
Businesses can claim Late Payment Interest and Compensation if:-
• They have supplied goods and services
• Their buyer bought for business purposes
• The contract is not a consumer credit agreement
• The contract does not contain a provision for interest on overdue invoices (or any other substantial remedy for non payment)
Businesses cannot claim Late Payment Interest and Compensation if the terms of business already provide for contractual interest on overdue invoices.
To use Late Payment legislation businesses should:
• Update all documents on which their Terms and Conditions appear.
• Circulate the revised Terms and Conditions to customers.
• Advise customers when the revised Terms and Conditions will come into effect.
The late payment interest rate is 8% above the Bank of England (BoE) base rate, and is set at the end of the preceding June and December.
Charles Wilson concludes: “Sometimes there is genuine doubt about whether an invoice is for the correct amount but that doesn’t negate the opportunity for claiming LPI and compensation. The business is entitled to late payment interest and compensation on amounts the customer admitted were due but just didn't pay until all queries were resolved. If the invoice is wrong but the customer has the information to work out the correct amount, the customer is expected to do the calculation and pay accordingly. The business will be entitled to late payment interest and compensation if they don't.
“However, if there is real doubt about the amount of the invoice, or a real dispute as to whether the money is due, you will not be entitled to late payment interest until the position has been clarified.
“We are urging businesses to look seriously at the barriers to claiming LPI and compensation and start addressing these. The legislation is there to protect them and with cash-flow so difficult in the current economy, businesses should be using all the tools available in the battle to survive.”.
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Charles Wilson, Chairman and Managing Director of Lovetts says: “In Q1 2008 only 31% of our activity had late payment interest (LPI) applied, in Q1 2009 it was closer to 37%. This is certainly encouraging but clearly there is still much work to be done in encouraging more businesses to claim compensation and interest and thus adopt this effective deterrent against persistent late payment in to their credit control procedures.
“The fact is, the use of late payment interest has taken a long while to be accepted by many companies. Ignorance of the legislation, how it can be adapted by individual companies and a fear of alienating clients, may be partly to blame and inevitably it is the micro SMEs that are most affected.
Lovetts has put together a quick overview on Late Payment Interest and Compensation for businesses to consider:
Compensation
• Compensation can be claimed for every invoice that was not paid within the credit period.
• Compensation can be claimed even if the invoice has now been paid.
• Businesses have up to 6 years to claim the compensation.
Size of debt Compensation
Up to £999.99 £40.00
£1,000.00 to £9,999.99 £70.00
£10,000.00 or more £100.00
Late Payment Interest and Compensation:
Businesses can claim Late Payment Interest and Compensation if:-
• They have supplied goods and services
• Their buyer bought for business purposes
• The contract is not a consumer credit agreement
• The contract does not contain a provision for interest on overdue invoices (or any other substantial remedy for non payment)
Businesses cannot claim Late Payment Interest and Compensation if the terms of business already provide for contractual interest on overdue invoices.
To use Late Payment legislation businesses should:
• Update all documents on which their Terms and Conditions appear.
• Circulate the revised Terms and Conditions to customers.
• Advise customers when the revised Terms and Conditions will come into effect.
The late payment interest rate is 8% above the Bank of England (BoE) base rate, and is set at the end of the preceding June and December.
Charles Wilson concludes: “Sometimes there is genuine doubt about whether an invoice is for the correct amount but that doesn’t negate the opportunity for claiming LPI and compensation. The business is entitled to late payment interest and compensation on amounts the customer admitted were due but just didn't pay until all queries were resolved. If the invoice is wrong but the customer has the information to work out the correct amount, the customer is expected to do the calculation and pay accordingly. The business will be entitled to late payment interest and compensation if they don't.
“However, if there is real doubt about the amount of the invoice, or a real dispute as to whether the money is due, you will not be entitled to late payment interest until the position has been clarified.
“We are urging businesses to look seriously at the barriers to claiming LPI and compensation and start addressing these. The legislation is there to protect them and with cash-flow so difficult in the current economy, businesses should be using all the tools available in the battle to survive.”.
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