When dealing with late commercial payments, the topic of charging interest and debt recovery is one that many companies require further education on. If you are consistently dealing with late payments of commercial debt, then it’s time to do something about it to protect your business in the future. Today we’re going to discover how our debt collection agency in the UK can support you with this task and help you to gain back control of your finances this year.
Can You Charge Interest for Late Payments?
A common question we receive is whether you can charge interest for late payments. As a business owner, you have the right to set your own terms when it comes to your payment processes. Late payment fees are very common in a variety of industries, as businesses simply can’t continue to operate if all of their clients pay them late. For that reason, you may want to consider adding a late payment charge to your invoices. You need to ensure you are very clear about this from day one though. If you don’t state that you will have to charge interest fees for late payment, you won’t have any ground to stand on if you need to take this action in the future.
An invoice is a form of legal document. Within it, you need to state the terms of your payment and the late fees associated with not paying a bill on time. You need to ensure you have very strict payment deadlines in place and share these with new clients before you agree to work together. Most people set their payment deadline to 30 days, but this may depend on the type of service or product you offer. You can adjust this timeline to fit the individual needs of a client, which is something you can discuss with them before entering business together. In the UK, if you don’t add a due date to your document, then your invoice needs to be paid within 30 days or 60 days for business transactions. This is measured from the invoice issue date, so keep this in mind when considering charges for late payments.
Should Your Business Charge for Late Payment?
As a business owner, it can feel quite uncomfortable charging for late payments. If you’ve never had to ask your clients for this before, you might feel like you don’t want to jeopardise your relationship and future business. You need to make sure you’ve done your part as a business owner to provide the service or product that they paid for. If they have any complaints about your service, make sure these are fully resolved before you enter into a discussion about late payment fees. You can’t just charge them for late payment if they didn’t receive everything they paid for, so make sure you are being fair to your customers too. When you send a late payment reminder, make sure you are on good terms, so that you don’t receive bad reviews or hurt your relationship later on.
Our top tip for late payments of commercial debts is to make sure you are clear about late payment fees from day one. If you don’t share this information, then you’ll find you have nothing to back you up when they refuse to pay. A client would have every right to not pay you if they weren’t aware of the payment deadline or the fee you would charge. Keep in mind that just because you make a policy for your company, you don’t have to use it each and every time. There are some situations where it’s best to just give the client more time. The past few years have brought with them so many challenges for businesses, so use common sense and think carefully before entering into a heated discussion with a client. If it’s their first time not paying you on time, be empathetic and listen to them first before deciding what the best action would be.
Are you struggling with late commercial payments? Our team will be here to support you with this issue and help you decide if charging a late payment fee is the best option for you. As you can see, there are many reasons to consider using this as a tool to receive payments on time. You need to be very clear from day one about the late payment fee, or you won’t be able to charge your clients this. They deserve to fully understand your payment terms, which will also help them to pay on time if they know when the deadline is. Get in touch with our team today to learn more about late commercial payments and how we can support you with this difficult situation that so many businesses find themselves in.