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how to calculate interest

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11 years 6 months ago #940 by bobsy1
how to calculate interest was created by bobsy1
How would the interest be calculated under the act for the following outstanding debt.

invoice 1 for £1550.40 became due on 30/11/12
invoice 2 for £538.38 became due on 7/12/12

Financial difficulties led to a payment plan being agreed of £500 monthly from January with the final £588.78 due to be paid in April.

The first £1500 was duly paid but it is the last £588.78 that has gone unpaid.

I wondered how the compensation and interest on the debt should be set out in the request for payment. Many thanks.
Bob

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11 years 6 months ago #942 by David J
Replied by David J on topic Re: how to calculate interest
Hello Bobsy1
There is not a easy answer to your question as you have a number of options. It would really depend on your relationship with the debtor. You could claim interest and compensation on both invoices from the dates they became overdue. Despite what they have already paid you. That would mean compensation charges of £70.00 and £40.00 plus a daily interest rate running from the day after 30/11/12 and 7/12/12. Although partial payments have been made, interest continues on the same daily rate as the original invoice amount.

There is more information about part payments in the users guide that can be found here. goo.gl/E0uXs

However you may think it fairer, and possibly easier, to get your money by concentrating on the outstanding £588.78. Possibly charge interest and compensation from the date when you should have received the last instalment?

If it was me, I would calculate what is owed from the due dates then use that information to make them pay the outstanding amount. If they don't pay within an agreed time, then make a full claim. If it did go to court (hopefully not!) then the judge may take a different view and remit part or all of the interest. They can't however remit the compensation.

Sorry. Not a straightforward reply and maybe someone else would have a different opinion.


Best regards

David

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11 years 6 months ago #945 by Safe_UK
Replied by Safe_UK on topic Re: how to calculate interest
Hi Bob,

As David says the interest accrues on the total balance until it is paid in full. So you don't technically need to factor in part payments.

For simplicities sake it will definitely be simpler to use a single calculation and it will give the reluctant client less room to question the results.

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  5. The late payment of commercial debts (interest) Act.
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