![]() Most of the effort, therefore, should be focused on managing customer relationships and cash flow management. The evidence suggests that the best way of securing payments on time is to agree to the terms and conditions in advance and invoice accurately. It is recognized as an exemplar for member states, which includes introduced measures to drive the culture of payment according to the agreed terms and conditions. ![]() This will certainly help relieve any cash flow problems. The European Commission believes that after introducing the law to all the EU member states, this will mean more than £90 billion to businesses across Europe. ![]() The continuous late payments of commercial debt is unacceptable to the business community, and they can never be substituted for effective customer relationships and cash flow management. The legislation is further aimed at creating an environment for on-time payments. Therefore, this revised directive is meant to strengthen the current order to extend the protections already in place and enjoyed by UK businesses across the Union. Medium-sized businesses and small enterprises or SMEs are the most vulnerable. As a result of this, administrative and financial burdens are likely to impede trade and increase the costs of doing business. Late payments are a significant obstacle to the free movement of goods and services, and they can substantially distort the competition. For all debts that are above £10,000, a fee of £100 is recoverable. For example, for any debt less than £1,000, a fee of £40 is applicable.įor debts that are more than £1,000, and less than £10,000, then a fee of £70 is recoverable. The compensation is recoverable according to the level of debt. The laws made in 2013 are not compulsory, and the supplier decides whether or not to use them.īut, any unpaid supplier of goods and services has the right to claim interest on any overdue debts and should be compensated under the 1998 Act. Most of these measures are geared towards reducing the culture of late payments and making payment on time a norm. The private sector and large firms have been using this law since 1998, while the small firms have been able to use it since 2002.Īs mentioned earlier, there was a clear amendment in March of 2013 that allowed business owners to charge extra fees for collecting late invoices. Since 1998, there has been a late payment legislation that saw businesses having the statutory right to charge interest for all late payments. The UK was one of the first countries within the EU to implement the late payment act to help promote a prompt payment culture. The additional compensation should be between £40 and £100 for each invoice. In this case, the interest to be claimed is charged at the rate of 8% above the base lending rate of the Bank of England. In brief, this law says that invoices that are paid late should attract interest charges.Īdditionally, for any invoice placed after 16th march of 2013 that is late, the business owner is allowed by law to claim any other reasonable costs related to collecting the debt.
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