If you never agreed a payment date, the law sets one for you. Here is when an invoice becomes late, how long terms can be, and what you can add once it is.
"When is this actually late?" is one of the most common questions behind an unpaid invoice. The answer matters, because the moment a business payment becomes late is the moment you can start adding interest and compensation to it.
Then that date is the deadline. Gov.uk guidance says an agreed payment date should usually be within 60 days for business transactions, and within 30 days where the customer is a public authority.
Businesses can agree longer than 60 days, but the guidance is clear that the term must be fair to both sides. Very long terms imposed on a smaller supplier by a larger customer are exactly what that wording is aimed at.
A lot of small businesses never set terms at all, or set them in a document the customer never saw. In that case the law fills the gap. Gov.uk guidance says payment is late 30 days after the customer receives the invoice, or 30 days after you deliver the goods or provide the service, if that is later.
Worth doing now: put your payment terms on every invoice and in your terms of business, and make sure the customer has them before the work starts. Terms the customer only sees after the job is done are much harder to rely on.
Between businesses, the Late Payment of Commercial Debts (Interest) Act 1998 gives you three things on a late invoice:
To work out the interest, take the annual amount on the debt and divide it by 365 to get a daily figure, then multiply by the number of days it is overdue. Gov.uk has a worked example if you want to check your sums.
These rights apply to business customers. They do not cover money owed by private individuals.
The payment date is also the point the clock starts on how long you have to recover the debt. In England and Wales that is six years for most unpaid invoices, so there is no legal rush. The commercial picture is different. The longer an invoice sits unpaid, the harder it tends to be to collect, which is why it is worth acting as soon as it falls due rather than waiting to see if it sorts itself out.
If you did not agree a payment date, gov.uk guidance says the payment is late 30 days after the customer receives the invoice, or after you deliver the goods or service if that is later. From that point a business customer is in late payment and statutory interest can be added.
An agreed payment date should usually be within 60 days for business transactions and within 30 days for public authorities. Gov.uk guidance says a longer period than 60 days can be agreed between businesses, but it must be fair to both.
Yes, between businesses. The Late Payment of Commercial Debts (Interest) Act 1998 entitles you to a fixed sum of £40, £70 or £100 per late invoice, depending on its size, on top of interest and your reasonable costs of recovery.
On a late business to business invoice, statutory interest is 8% a year above the Bank of England base rate. To work out the daily amount, take the annual interest on the debt and divide it by 365.
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