Businesses need guidance on calculating late payment interest
A survey by the Better Payment Practice Group (BPPG) has found that businesses need guidance on calculating late payment interest. Almost three quarters of the 1,476 businesses surveyed on this website, www.payontime.co.uk, admitted that they are unable to calculate the interest due to them.

The BPPG is concerned that this is deterring firms from using the late payment legislation and is reminding businesses about the free statutory interest calculator on its website. By inputting a few details, businesses can quickly and easily calculate the amount of interest they are entitled to charge on unpaid invoices. A sample letter is also available to notify debtors of the amount of interest due.

Under the UK’s late payment legislation, businesses are entitled to charge late paying customers interest at a current rate of 11.75% on overdue commercial debts. Interest runs at a daily rate while the debt remains outstanding. Businesses are also able to claim up to £100 in debt recovery compensation.

Clive Lewis, Chairman of the BPPG commented, “Businesses should remember that they have a statutory right to interest on unpaid debts. By not understanding how to calculate what is due, it is impossible to make an informed decision on whether using the legislation would be an effective lever to encourage payment.

“ The BPPG wishes to highlight all the credit management techniques available to businesses, including the right to interest and compensation which can be a powerful deterrent against being paid late.”

A free guide to understanding the late payment legislation, can be found at www.payontime.co.uk.

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