Did You Know You Can Recover Costs on Late Payments?

Late payments are frustrating enough on their own, but many businesses don’t realise they may be entitled to claim more than just the original invoice value.  In certain circumstances, you can add statutory interest and fixed recovery costs to overdue commercial debts.

Understanding these rights can make a real difference to your cash flow and can also encourage customers to take your payment terms more seriously.

Your Right to Claim Interest

Under UK legislation, businesses are automatically entitled to charge interest on late payments in business-to-business transactions.  This applies even if your contract does not specifically mention it, provided there is no alternative remedy already in place.

Statutory interest is calculated at the Bank of England base rate plus 8 percent.  It compensates you for late payment and encourages prompt settlement.  In many cases, once interest is added, debtors are far more inclined to settle the balance quickly.  For some businesses, simply outlining the interest calculation in a formal demand is enough to bring matters to a close.

Interest can usually be applied from the day after payment was due.  This means that even a short delay can begin to accrue additional sums, particularly on higher value invoices.  Over time, this can become significant.

Recovery Costs Can Also Be Added

In addition to interest, you may also be entitled to claim fixed compensation for the cost of recovering the debt.  The amount depends on the size of the unpaid invoice:

  • £40 for debts up to £999.99
  • £70 for debts between
  • £1,000 and £9,999.99
  • £100 for debts of £10,000 or more.

These sums are set by law and can be added without having to prove the time spent recovering the debt.  They exist to recognise that late payment creates administrative burden and cost for your business.  In some cases, if recovery costs exceed the fixed amount, it may also be possible to claim reasonable additional costs.

Why Many Businesses Don’t Claim

Despite these clear entitlements, many organisations never apply interest or recovery costs.  Some are unaware that these rights exist.  Others are concerned about damaging relationships.

Handled properly and professionally, however, adding statutory charges simply reinforces agreed payment terms.  Commercial customers understand that late payment carries consequences, particularly when the law supports the claim.  When applied consistently and fairly, it often strengthens rather than harms business relationships.

Getting It Right

Applying interest and recovery costs should be done accurately and clearly.  Calculations need to reflect the correct dates and rates, and demands should set out the breakdown in a structured way.  Presenting this information professionally often increases the likelihood of prompt settlement and reduces the scope for dispute.

This is where experienced debt recovery support becomes valuable.  Ensuring everything is calculated correctly and communicated clearly avoids unnecessary conflict and strengthens your position from the outset.

If your business is dealing with overdue invoices, Jackson CRS can advise you on what may be recoverable and help you take the right steps.  Don’t leave money unclaimed — make sure you are using the full protection available to you by calling us today on 01603 319 034.