Three week countdown until Late payment legislation revised

The Better Payment Practice Group is urging UK businesses to take immediate steps to ensure that they benefit from the new statutory rights available to them under the Late Payment of Commercial Debts Act, due to be introduced in just three weeks time.

From 7th August 2002, the Late Payment of Commercial Debts [Interest] Act 1998 will be amended to incorporate the benefits of a new European legislation referred to as the EC Directive.

Under the amended legislation, business owners and managers will be able to claim reasonable debt recovery costs and will benefit from the simplification of the calculation of statutory interest. Additionally, bodies representing small and medium-sized enterprises, such as the Forum of Private Business, will have the right to challenge grossly unfair contract terms used by purchasers, which may affect the ability to recover late payment interest.

The Better Payment Practice Group is encouraging businesses to familiarise themselves with their new statutory rights over the next three weeks and to update their credit management policies accordingly. The following actions should be taken by businesses wishing to prepare for the changes:

• Update credit management policies so that customers are notified at the outset that the legislation will be used if payment is late;
• Ensure that both credit management and sales staff are aware of and understand the new benefits available;
• Amend credit management documentation, such as contracts, invoices and reminder letters so that they clearly state the creditor’s intention to use the legislation if necessary to obtain payment.

The Better Payment Practice Group recommends that businesses use the following wording in their revised credit management documents: “We understand and will exercise our statutory right to claim interest and compensation for debt recovery costs under the late payment legislation if we are not paid according to the agreed credit terms”.

Dominique Vaughan Williams, member of the Better Payment Practice Group commented: “Late payment is a real headache for many businesses across the UK, as they are forced to waste considerable time and money chasing overdue invoices.

“We anticipate that the new measures will provide compensation and support to these businesses and we urge them to take a few simple steps to ensure that they don’t deny themselves the benefits that will soon be available to them.”

A new guide entitled ‘A User’s Guide to Late Payment Legislation’ has been published to help businesses benefit from the new legislation. It can be downloaded from this web site by clicking here.

You can keep up to date with the Better Payment Practice Campaign by sending us an email