SVA Forum

[dawnjlane]

Hi everyone

Following on from a thread a while back about late payments by clients, I was speaking with one of my clients the other day about an invoice that had become overdue. She works for a not for profit organisation and always forwards my invoices for payment within 24 hours of receiving it. For some reason their accounts department hadn’t received or processed it as normal and have sat on it until last week.

She chased the invoice to find that it wasn’t going to be paid (for whatever reason) by BACS until this week and is currently in the process of being cleared into my bank account today, 13 days late!

What she did tell me was to charge her interest on the late payment with this month’s invoice due to her at the end of the week.

Not being very mathematically minded, I struggle to find out how to work out the interest per week (my T&Cs for this client are at 5% per week overdue).

I found this fantastic site where you put in your figures, tick a box for daily, weekly or monthly charges and it works it out for you and allows you to print the report off to attach with your invoice http://www.payontime.co.uk/calculator/contractual.html

What I have also discovered whilst researching is that there is a large discrepancy between what the contractual interest rate you set and the statutory interest rate allowed to charge as a small business will make to late payment interest (http://www.payontime.co.uk/calculator/statutory.html). Even if you don’t mention in your T&Cs when overdue payments will incur interest, you are legally allowed to charge if payment hasn’t been made after 30 days of issuing the invoice. For contracts dated on or after 7th August 2002 the late payment interest rate is 8% plus the reference rate. The current reference rate for the period 1st July 2008 to 31st December 2008 is 5.0%.

My late payment interest for this client is charged at 5% per week overdue and works out at £64.21 (the formula for this isn’t shown). If I was charging the statutory 8% above the reference rate (5%) it would be £3.61!! The formula used by the statutory interest calculator is as follows: Debt times the interest rate times the number of days late divided by 365.

Check your T&Cs and decide what interest you want to charge!

Dawn
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Dawn Lane VAcertified MAMS MInstAM
Your Office Online - www.your-office-online.co.uk
Virtual Business in a Box Ltd - www.virtualbusinessinabox.co.uk
dawn@your-office-online.co.uk
dawn@virtualbusinessinabox.co.uk

[admindoc]

Thanks Dawn, very useful info there girl :)
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[jackie]

Yes,unfortunately the legal stuff is rubbish and isn't worth charging! I always charge 8% and have had no problems getting folk to pay it. They accept they're late, they have to pay more.

[dawnjlane]

[quote="jackie"]Yes,unfortunately the legal stuff is rubbish and isn't worth charging! I always charge 8% and have had no problems getting folk to pay it. They accept they're late, they have to pay more.[/quote]

IJi have just changed my T&Cs/Invoices to reflect 8% for new clients also.

Dawn
_________________
Dawn Lane VAcertified MAMS MInstAM
Your Office Online - www.your-office-online.co.uk
Virtual Business in a Box Ltd - www.virtualbusinessinabox.co.uk
dawn@your-office-online.co.uk
dawn@virtualbusinessinabox.co.uk

[coxvos]

I haven't voted in the poll as the only time I charged statutory interest was when I took a non-paying client to the small claims court after several months of excuses.
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Regards

Lynn

[Sally@Stonetext]

Having taken a client to court over non-payment (yes I got full whack plus interest, plus costs) I now try to avoid getting into the position in the first place and require a deposit before work starts. This usually weeds out the time wasters.

Possibly not the first time but they would be warned and subsequent late payments would probably incur a charge. Thankfully all my current clients pay on time (touch wood).
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[coxvos]

[quote="Sally@Stonetext"]Having taken a client to court over non-payment (yes I got full whack plus interest, plus costs) I now try to avoid getting into the position in the first place and require a deposit before work starts. This usually weeds out the time wasters.

Possibly not the first time but they would be warned and subsequent late payments would probably incur a charge. Thankfully all my current clients pay on time (touch wood).[/quote]

That's good advice, Sally.

My client was a VA who subbed some work to me and then made numerous excuses for not paying, including her client hadn't paid her, her client's cheque had bounced, etc, etc. Of course when you sub to another VA you should pay their invoice within their terms regardless of when your client pays you.

Do you apply the same rules when doing sub-contracted work?
_________________
Regards

Lynn

[dawnjlane]

Sally

My client is an ongoing client and has been with me for over a year so having a deposit each month isn't really workable. Also, due to the policy of the company she works for, they are unwilling to enter into a monthly retainer paid in advance, so have no choice but to invoice in arrears each month. There hasn't been any other occasion where they have paid late so hopefully won't happen again once they get this month's invoice with the added interest!

Lynn - I would treat any sub contracted work in exactly the same way as work for a client. Invoice issued as normal, with the same payment due dates and add interest if unpaid.

I have been in a similar situation as the person you did the work for in that I sub contracted some work out earlier this year. The work was completed on time, and an invoice submitted to me. However, when I came to pay the invoice, there was a problem with my bank and it took me a lot longer than normal to pay the invoice to the subcontractor. I ended up paying it outside of the due date which was extremely embarrassing to say the least.

Dawn
_________________
Dawn Lane VAcertified MAMS MInstAM
Your Office Online - www.your-office-online.co.uk
Virtual Business in a Box Ltd - www.virtualbusinessinabox.co.uk
dawn@your-office-online.co.uk
dawn@virtualbusinessinabox.co.uk

[coxvos]

[quote="dawnjlane"]

Lynn - I would treat any sub contracted work in exactly the same way as work for a client. Invoice issued as normal, with the same payment due dates and add interest if unpaid. [/quote]

Sorry for any confusion - I was referring to taking a deposit from the VA who is sub-contracting just as Sally takes a deposit from her clients. The VA I took to court was given the same payment terms, etc, and ended up paying several months of added interest.
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Regards

Lynn

[Emma Ewers]

Hi all

One of our companies deals in debt recovery and gives this advice.

Depending on your current terms, 'The Late Payment Act' allows the claimant to apply for interest at 8% above the Bank of England base rate. In addition claims can be made for 'reasonable debt recovery costs' of between £40 and £100 depending on the size of the outstanding debt. One important point to note, is that if your contracts terms & conditions include a rate of interest to be charged for late payment, then this will take precedence over the Late Payment Legislation. You should consider reviewing your terms and conditions, if the interest rates you state are less than that allowed by the Late Payment Legislation.

Hope this helps

Emma
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