One year on – Is your firm making best use of the Late Payment Legislation?

A year on from the introduction of the final phase of the late payment legislation, the Better Payment Practice Group (BPPG) is keen to ensure businesses are making the best use of their rights.

Whilst the number of firms making their customers aware of their rights under the legislation has increased four-fold in the past three years, the BPPG is aware that many firms remain unclear about how and when to use the legislation.

To help businesses, the BPPG has put together answers to some of the most commonly asked questions. A full list is available by clicking here.

Do I charge compensation each time I chase the outstanding debt?
No, compensation is only charged once per outstanding debt, not each time it is chased.

Can I charge individuals statutory late payment interest?
No, the legislation only applies to business to business transactions.

If a debt was incurred prior to the 7th August 2002 can I claim compensation?
No, the compensation element only applies to contracts dated on or after 7th August 2002.

If a business is consistently paying late for the service we provide them, can we start to charge interest even though we did not agree that we would at the start of doing business with them?
It is not necessary for you to have notified your customer at the start of your relationship with them of your intention to charge late payment interest and you do not have to refer to it in your contract. However, it is advisable [but not obligatory] that you amend your terms and conditions and make reference to your statutory right to interest in future contracts, as this may act as a deterrent against late payment.

Clive Lewis, BPPG Chairman, commented: “The late payment legislation is not intended as a substitute for good credit management and should be used alongside other techniques such as credit vetting, accurate invoicing and a good collections process. Firms can find the legislation is best used as a deterrent against the instance of late payment rather than a last resort when faced with an overdue invoice. We hope that by publishing the common misconceptions, businesses will feel more confident about when and how to use their statutory rights.”

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