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Adding Interest to Company Debt


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Hi Guys,

 

Not sure whether this is the best forum to post this in (any help appreiciated) however:

 

I have a small recruitment agency and one on my clients (who happens to be a major television company) is extremely late on paying my invoice for recruitment services, despite clear terms and conditions prior to interviews taking place, clear invoices, clear reminders and polite telephone calls / emails.

 

I want to know whether I can add interest on the invoice and how I go about doing it, as far as I understand I can charge 8% over the BOE base rate (on the day the invoice was issued), but I am not sure whether this is calculated on a daily rate or a 'one off' addition and also do I send a separate 'interest' invoice or send them a new invoice with the interest added on?

 

Any help would be greatly recieved as cash flow for small business like mine (just me and the wife) is essential and I do not think it is fair that large well known PLC can be so controlling with money when I did them a fantastic service and found them a fantastic member of staff (all on time!!!)

 

Thank you very much

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Yes, you add interest at a daily rate (but you must have given them at least 30 days to pay).

 

Why don't you phone their finance department and advise this is what you are going to do and then send regular weekly invoices for the additional amount?

All help is merely my opinion only - please seek legal advice if you need to as I am only qualified in SEN law.

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Hi Tiglet,

 

Thanks for the advice.

 

I wrote to them last week (accounts payable) informing them that I would be adding interest if they have not paid by Monday 17th Sept and followed it up with a call, but no response. (all letters rec deliv).

 

So as it is after 30 days (28 days after 30 days if that makes sense, 58 days since the interest was issued) and the invoice amount is for £5,405, how do I calculate what to add? Is it 5.75%, bank of england base rate on 21st july + 8% =13.75% of £5,405 which = £743.18 total to be added or is it a daily amount?

 

Please help!!!!!!

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Sorry to break it down

 

Total Invoice Amount - £5,405

Due date: 21st July 2007 with 30 day payment terms

(Amount should have been received on 20th August 2007)

(4 letter sent rec deliv, 3 emails and 3 telephone calls)

Interest rate on 21st July 2007 – 5.75%

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Have a look at this Your right to claim interest on late payments | Business Link

 

It will help you work it out (sorry, maths has never been my strong point).

 

I ahve had to do this myself before - it's very annoying, isn't it?

All help is merely my opinion only - please seek legal advice if you need to as I am only qualified in SEN law.

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Under the Late Payments of Commercial Debts Act 1998 you can charge any company base rate plus 8% (currently 5.5% so interest = 13.5%) I always send a letter advising that if cleared funds not received with in 7 days interest will begin to be charged and is currently at £x

 

This site has a really good guide to doing it and a calculator which makes life easy too:

 

Late payment legislation and the BPPG Interest calculator.

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You would be best to notify all of your customer in writing if you are going to charge interest for payments not received on time, this could be a short note added to the bottom of all of the invoices that you send out. If you don't do this, a client could drag things out with bull**** arguements.

 

I work in finance, and I have heard some bull**** in my time. If I had a tenner for every time I've heard "the cheque is in the post" or the other classics "I didn't get that invoice" or "I'm waiting for the bank to send me out a new cheque book", I would be retired by now with a fortune in the bank. Make things as clear cut as possible, put things like interest charges in writing and they can't say "You can't charge me that, I wasn't told". This may not matter, but as I said, if you get some finance clerk who doesn't care as the interest isn't being taken out of her wages, the company may just choose to be akward hold onto the payment for longer until she has to "see her supervisor" or something. It really ****es me off as well they way that large companies who can well afford to pay and have staff specially trained for the finance part of things take the ****.

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I would send a separate invoice - that way, if they o contest it, it will stop them not paying anything.

 

Just my opinion, though.

All help is merely my opinion only - please seek legal advice if you need to as I am only qualified in SEN law.

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Hey Guys,

 

Sent the company in question (Granada Television/ITV) a further invoice for added interest plus a compensation payment of £250 (my T&C's say I can charge such payment, although the amount is not specified, something I must change) and low and behold I can remittence advice from them this morning saying the money will be cleared in my bank tomorrow!

 

Am I still going to pursue them for the second payment - damn right!!!!

 

Result!!!!! Thanks for your help guys!!!

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Thank you so much, that was really helpful.

 

Do I send them a separate 'interest invoice' or do I send them a revised invoice with the interest added on?

 

A seperate invoice would be okay, with a short note on it informing them that charges will continue to accrue at the rate of ??? (whatever you are charging per day/month/annum) if they don't pay up. You could enclose a statement of account along with the new invoice informing them of the outstanding invoices, and the total owed. I normally would have sent invoices monthly, if the payment didn't come in on time, another invoice for interest, and then another the following month. I personally had a limit of 3 months of non payment until a small claim was launched, a final warning letter would have been sent with the 3rd month's invoice informing them of this action if the account was not settled. It's up to you though whether you want to send them fortnightly or whatever, as long as the figures add up it doesn't matter.

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