Under the Late Payment of Commercial Debts (Interest) Act 1998 it is fine to levy interest on unpaid overdue business invoices as long as you use the statutory calculation to do so.
When a payment becomes late on a business invoice, a company can claim interest as well as some debt recovery costs (if stated in your terms and conditions you can recover the entire debt collection costs) if another business is late settling invoices relating to goods and services.
If you agree a payment date, it must usually be within 30 days for public companies or 60 days for business transactions. You can agree a longer period than 60 days for business transactions but it must be seen to be fair to both companies.
The interest you can charge if another business is overdue on settling your invoice is ‘Statutory Interest’ currently at 8% plus the Bank of England base rate.
If a payment date is not agreed, the law indicates that the payment is late 30 days after either the customer receives the invoice or when you deliver the goods or provide the services (if this is later than when the invoice is sent).
You cannot claim statutory interest if there’s a different rate of interest in your contract or business terms. When you have calculated the statutory interest, remember to send a new revised invoice to the client showing the amount they now owe you.
Alternatively, let your assigned Debt Collection company deal with the interest for you on your behalf as they recover your original overdue invoice whilst they proceed with the collection of your outstanding debts. A statutory amount can also be charged to a business for the cost of recovering a late commercial debt on top of claiming interest from it. The amount charged is a tiered scale determined by the debt amount - https://www.gov.uk/late-commercial-payments-interest-debt-recovery/claim-debt-recovery-costs.
Check out our Debt Recovery calculator to see how much interest you can charge on top of your existing business invoice debt, as well as our fees to collect the amount for you @ https://www.creditcontroluk.co.uk/debt-recovery-calculator
For help with getting your overdue business invoice debts collected, contact us on 0208 720 7309 or email email@example.com