How To Charge Interest On Late Payments

Charging interest on late payments is a legal way to recover compensation on money that is owed to you. When a customer pays their debt late, they are essentially borrowing money from you. Businesses can earn back some of the money that they have lost due to late payments.

In this blog post, we will discuss how to charge interest on late payments and the benefits of doing so!

Can you charge interest on late payments?

Yes, businesses can charge interest on late payments! This is known as “late payment interest”. When a customer pays their debt late, businesses can earn back some of the money that they have lost due to late payments.

The Late Payment of Commercial Debts (Interest) Act 1998, permits businesses to charge interest by law.

The act states that the “statutory interest starts to run on the day after the relevant day for the debt… The relevant day for a debt is— where there is an agreed payment day, that day, unless a different day is given; where there is not an agreed payment day, the last day of the relevant 30-day period.”

This legislation allows businesses to charge a late payment interest rate of the current Base Rate plus 8% on overdue invoices or bills. In addition, the good news is that even if it is not detailed in your contract terms you can still charge late payment interest on overdue charges.

Benefits of charging interest on late payments?

There are many benefits of charging interest on late payments.

– businesses can earn back some of the money that they have lost due to late payments

– it can help to deter late payments in the future

– businesses can improve their cash flow

– it can also protect suppliers from bad debt