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Penalty for late payment of invoices

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4 years 3 months ago - 4 years 3 months ago #2006 by richardwalter
I am considering adding a penalty for late payment of invoices to my terms and conditions.

Most of my clients are very good about paying my invoices, but I have one who more often than not has to be chivvied once the 30 days are up and they are due. I am beginning to find this very irritating - especially as I often put myself out to deliver things for her at short notice: I have never missed a deadline, so I don't see why I can't get paid promptly too.
Principally with this client in mind, I would like to specify a penalty charge where payment of invoices is late. Do other people successfully impose such a charge, and what would an appropriate amount be?

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4 years 3 months ago - 4 years 3 months ago #2007 by james@cpa.co.uk
Hi Richard,

The Late payment of commercial debts Act allows you to add the compensation charges and you do not need to have it as a clause in your terms and conditions.

If an invoice under £1000 is paid late you can add £40 in compensation.

If an invoice under £10,000 is paid late you can add £70.

And if an invoice of £10,000 or more is paid late you can claim £100 in compensation.

This compensation is for your own efforts in collection.

You can also add any 'reasonable' third party collection costs.

You can also add interest.

The above compensation is successfully recovered all the time.

In theory you could set different fees in your terms and condition but you are potentially more likely to be challenged on it by your debtors and penalty clauses are unenforceable in uk law. The courts will ask you to demonstrate loses incurred as a result of the debtors actions to justify the damages you are claiming.

if you stick to the compensation awarded in the act then there can be no such challenge.

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