It can be difficult working with small business sometimes,
and with this current economic crisis, it is more important than ever that people get the money they have earned when they are supposed to get it. Without your paycheck, there is nothing to stop you from possibly running into financial problems of your own. In fact, every year, there are over 10 thousand businesses reported by the DTI as having gone bust. One of the main reasons why these businesses are going under are because of very poor collection of debts, as well as paying invoices late. There are limited companies and sole traders that have to deal with people who pay their invoices late, and that makes everyone have problems with cash flow. If people aren’t paying on time, that makes it difficult for the customer and the supplier to keep a good relationship, either, so it really messes things up.
Thankfully, small businesses were given the right in 1998 to actually claim interest on the late payments that they need from other businesses. This would make it easier for them to claim interest when the companies had over fifty employees, but in 2000, it was also changed so that small businesses can claim it on other small businesses. This is a wonderful idea, as it now gives small businesses a way to help deal with problems that stem from getting these payments late.
- As the laws state, once the payment date agreed on by both parties passes, that payment is then considered late, so make sure that you know when that date is. In the event that you did not actually set out specific payment/credit terms on your invoices, or talk with them in advance, the law states that you are to give them a thirty-day period to pay. After that particular date, you can then charge interest, which would be considered 8% above your base rate.
This means that you can actually put that you have the right to claim interest on your invoices so that groups are held responsible for paying. If they do not pay within that thirty-day period, then you can start charging. When you write up your own invoices, though, be sure to make sure those Late Payment terms and the settlement date are on it so that you can cover your bases.
In the event that you feel you might not want to really pursue it this way, given that you do not want to ruin the relationships with your customers, which you feel chasing down all the invoices will do just that, then you may need to look at a different approach. The best way to do that is to go see the actual customer and make sure that they are aware after the payment period is over that there is going to be interest chargeable. Since you do not want them to actually have to pay that interest, you can probably get the payment arranged in an agreeable way. If you cannot, then consider using a solicitor who can then notify the customer instead. It normally only takes two or three reminders at the most to get a late payer to actually take care of their debts, though.