A few questions.

Hello Craig

Thank you for sharing this site with other small businesses.

My suggestion is that you use the 'late payment of commercial debts interest act' rather than your 4% over base. The current legislation allows you to charge a daily interest rate of 8.5% plus a compensation fee related to the amount of the debt.

Up to £999.99 £40.00
£1,000.00 to £9,999.99 £70.00
£10,000.00 or more £100.00

It would be a good idea to read through the users guide to make yourself familiar with the legislation and your rights.

If your client pays the invoice but ignores the compensation and interest then that payment is used to pay the compensation and any outstanding interest first. Then remainder pays off the invoice.

Because the invoice is now effectively partially paid, interest and compensation will continue to accrue at the daily rate of the full amount as in the examples below:


Total invoice = £2,800.00
Total days overdue: = 109 days
Interest rate used: = 8.5%
Daily interest rate: = £0.6521
Total Interest owed = £71.07
Compensation: = £70.00
Total owed to date: = £2,941.07

Taking the example above, if the debtor only paid the invoice total, the result would be this.

Total invoice = £141.07
Total days overdue: = 109 days
Interest rate used: = 8.5%
Daily interest rate: = £0.6521
Total Interest owed = £00.00
Compensation: = £00.00
Total owed to date: = £141.07


If the remainder of £141.07 remains unpaid, then interest will continue to accrue the next day at £0.6521p per day.

After 30 days, the amount owed would be: £160.63
After 6 months the amount owed would be: £258.45
After 1 year the amount owed would be: £384.83
And so on.

I hope this helps and god luck

Regards

David