Businesses struggling with poor cashflow due to late payers are missing a major opportunity to claim late payment interest, according to a law firm specialising in debt recovery.
Lovetts has found that in the past year approximately 36% of claims issued included late payment interest.
Charles Wilson, Chairman and CEO of Lovetts, says: “While the number of claims that include late payment interest has slowly increased on an annual basis, Late Payment Legislation is still not used as much as it could be and businesses aren’t recovering the compensation they are entitled to.
“The reluctance to apply late payment interest may be blamed on various factors, not least the delicate balancing act of maintaining good relationships with customers while being firm about payment terms. As tough trading conditions continue, more businesses are being forced to reconsider their options and while we have seen the number of invoices with LPI added more than double in the past year, there is still some way to go before we can say the application of late payment interest has become standard practice.
Businesses need to exploit any tool to help an invoice get up the priority list for payment and Late Payment Legislation is both clear and easy to use
Charles Wilson, Chairman and CEO of Lovetts
“We are not talking insignificant amounts here. Just taking an example of five relatively small debts received from a client trading in the publishing sector.
“The original debt balance due totalled £2,004, when late payment interest and compensation were added in, the total due became £3,407 which was successfully recovered via Lovetts’ services. This is all down to the simple adoption of the terms of the Late Payment of Commercial Debts (Interest) Act 1998, as amended by the Late Payment of Commercial Debts Regulations 2002.
“Businesses need to exploit any tool to help an invoice get up the priority list for payment and Late Payment Legislation is both clear and easy to use. With applicable interest rates at 8% over Bank of England base rate (at the previous 31 December or 30 June) and a minimum charge of £40 per invoice, it’s a powerful incentive for businesses to pay up."
