Late commercial payments: charging interest and debt recovery (2024)

FAQs

What is the late payment of commercial interest act? ›

The Late Payment of Commercial Debts (Interest) Act 1998 (the Act) provides businesses with the statutory right to charge interest and a fixed administration fee on overdue invoices. The Act can only apply under the following circ*mstances: There's a legally binding contract in place between the two businesses.

When explaining a delay in payment, honesty and transparency are key. Begin by acknowledging the missed deadline and express your commitment to resolving the situation. Clearly state the reason for the delay, whether it's a financial discrepancy, processing error, or unforeseen circ*mstances.

Business debt recovery is the process of chasing businesses to pay back money they owe. Good commercial debt collectors: Promote amicable debt collection and good relations between parties. Liaise with debtors across jurisdictions and time zones.

Dear [Contact Name], I would like to apologize regarding the delayed payment for invoice [Insert Invoice Number]. We experienced a [payment processing error, administrative issue, etc.] that resulted in a delay in processing this payment.

As a vendor, it's entirely legal for you to charge interest on unpaid invoices. However, the real question is whether your clients are legally obligated to pay it. A vendor should include these details in a contract or statement of work agreement before any work begins.

Because the government doesn't regulate a business' late payment fee, you can, in theory, charge whatever payment interest rate you see fit. However, small companies tend to charge a late transaction payment interest rate of 1.5%, while larger enterprises charge 2.5% and up.

A goodwill letter is a formal letter sent to a creditor, lender or collection agency to request forgiveness for a late payment or other negative item on your credit report. In the letter, you typically: Explain the circ*mstances that led to the late payment or issue.

I am sincerely sorry for the delay in payment on {loan type}. I apologize for any inconvenience or frustration this caused you. The delay was caused by {reason}. While I take full responsibility for my mistake, I would like to assure you that this was a one-time error on my part.

The commercial debt forgiveness rules also apply to a non-equity share issued by a company. A debt is forgiven if the company's obligation to pay the debt is released, waived or otherwise extinguished, other than by repaying the debt in full.

How do I get out of commercial debt? ›

If you want to charge late payment fees, you certainly can. However, these need to be clearly stated on the invoice so the customer is aware of them and encouraged to pay on time.

If you have made late payments or have missed payments, the lender will want to understand why. The reason may not have been in your control, such as a medical reason or unemployment. If you typically pay on time, indicate as such.

I truly believe that it doesn't reflect my creditworthiness and commitment to repaying my debts. It would help me immensely if you could give me a second chance and make a goodwill adjustment to remove the late [payment/payments] on [date/dates]. Thank you for your consideration, and I hope you'll approve my request.

What Are Acceptable Reasons for Late Payments on Credit Report? Acceptable reasons for late payments on a credit report typically include extenuating circ*mstances that are beyond the individual's control, such as serious illness, sudden job loss, or natural disasters.

Under the late-paid interest rules, relief for interest unpaid 12 months after the period in which it accrued is deferred until it is actually paid.

The failure to pay penalty is 0.5% of the unpaid taxes for each month or part of a month the tax remains unpaid. The penalty won't exceed 25% of your unpaid taxes.

The amount you can charge is called 'statutory interest' and is calculated as 8% plus the Bank of England base rate. The rate you can charge is set every 6 months on 1^st January and 1^st July. You can find the current, and previous interest rates that you can charge on the Pay On Time website.

Any amount due to a Party pursuant to this Agreement and remaining unpaid after the date when payment was due shall bear interest from the date such payment was due until paid at a rate equal to the Base Rate in effect from time to time.