I was hoping someone could help as I am unsure of the legalities around what I am considering.
I have one customer who has used my services twice in quick succession, but not since.
I have invoiced this customer for both services, however the invoices are now 78 days overdue.
I was considering adding on additional charges/late fees, but I have never done this.
I was wondering if I was within my rights to add late fees? My concern is that on the invoice it does not mention late fees if payment is not made and Im not wanting to leave myself open to repurcusions.
Collection/late fees can be applied to any outstanding business debt without it being officially listed in your invoice/contract. If you have the due date on your invoice and they have not paid and you have sent reminders etc then at this point you can apply standard interest rates as per whatever the rates are now (gov.uk will have info on what you can charge).
Can I check my understandings with you… based on the link which @QFMathew shared, does that mean that I shouldnt add, for example, a 5% charge to the invoice, that instead I should add 8.5% to the total and give a daily charge based on (interest_charge/365)*no.days?
I dont know if I am maybe misinterpreting but if that is the case then it seems like a lot of work to invidulate and ensure that the customer then pays the correct rate+interest amount.
You could just state they owe x amount for the late payment (collection fee) and if not paid within x days the full amount will be subject to the interest. At this point they know that after x days they will then owe the collection fee plus the interest, and that it will increase daily, and it will be up to them also to pay the correct amount.
As for the complexity, it is and it isn’t. There are several online interest calculators or you could easily knock up a column in a spreadsheet to say what is owed each day.
You could chase the fees but if they haven’t paid on time and they then ignored the fees the chances are you’ll just end up wasting more of your time & ultimately achieve nothing. I’d be inclined to just leave it at that and blacklist them if the invoice is settled at least.
The key question is whether this customer is a consumer or another business. The statutory penalties Lurch describes are for late payment of commercial debts only, and those rules don’t apply to B2C transactions.
Providing the customer is not disputing the invoices/debt, I’ve always had success instructing ThomasHiggins.co.uk Solicitors to send late payment demand letters to debtors.
You can input the customer/invoice details to their website, they calculate the late payment interest, then have them issue a letter for around £10. I think it always adds weight when debtors see a formal letter from a solicitor.
I have found in the past the Thomas Higgings letter before action has brought about payment. They used to be about 3 quid (doesnt calculate interest eyc) but threat of court action meant they paid.
Hi Paul, don’t bother with late charges and the like. Concentrate on getting paid for your work. Nice emails/letters at first, followed by tougher messages, then threaten County Court (say after 90 days) making sure you send it in writing and recorded delivery. This progression has always worked for me (except when people go bust!) for over 35 years. Cheers Neil
Yes I agree with Neil. I have a very similar approach.
I’ve found that being methodical is best.
I always start off with gentle reminder emails and phone calls. I always take written note of phones calls so they can be referred back to if necessary. As the debt gets older, the tone of my reminder emails and phone calls get tougher.
(If anyone’s interested, it’s known as a dunning process.)
If my previous communications bear no fruit, I send a final reminder threatening legal action and giving 7 days for a payment to be made. Once the 7 days are up, I instruct solicitors. At this point, charges and interest are added. However I’ve never had a customer pay those charges/interest yet! I’m just happy to collect the original balance at this point!
I was assuming you’d already sent the reminders etc out and not got anywhere, hence the charges. I don’t offer terms or credit so when a debt has got to 78 days overdue and the customer hasn’t replied or responded to any emails or reminders I would not consider adding interest to be excessive or harsh. However, due to a lot of Quickfiles emails ending up in junk you have to make sure you have sent them a couple of reminders yourself.
Another way of looking at this (and this question has been asked a few times on here) is to add the (some) charges on beforehand and simply offer a early settlement discount. This does need a bit of manual intervention though to make everything fully paid up if they pay early.
Personally I sit in the middle, I ensure the invoices cover overheads and admin, card/payment processing fees etc so for the most part there is some degree of interest already allowed for. The letters and reminders with fees added usually just gets the original invoice amount paid.
All depends on a) your customer base and b) how often this actually happens. Most of the time for me it’s just B2B clients not even looking at the terms and putting it in their pile for payment in their usual timely manner, EoM+30 usually. That isn’t my terms though.
