We know it can sometimes be a struggle to get money from difficult customers or make sure they pay on time. When you’re a contractor, freelancer or a small business owner this isn’t money you can easily wait for.
We hope to shed light on what the rules are and what you can do to get the money you’re owed. We can help your business and stay on top of your finances, just send a message to our accountants in Milton Keynes.
Getting Paid
When you’re a freelancer, contractor or the owner of a small business, receiving all payments on time or not can often be essential for whether you manage to earn enough that month to pay for your own household bills, food etc. Clients can often forget to take this into consideration but they are your clients and do still matter.
The EU’s Late Payments Directive luckily gives you the power to take action on any invoices that are unpaid. It also allows you to make additional charges on the amount you wish to claim back from your late-paying client.
Before you begin working with a new customer or client it is always a good idea to agree on strict deadlines for payments. However we are aware this isn’t always possible depending on the nature of your business.
Most businesses or self-employed people set the payment deadline for thirty days from the day the contract is completed. This means both you and the client will know when the invoice is due. You shouldn’t feel pressured into accepting the client’s payment terms if they aren’t practical.
Additional Costs
For any invoices that are overdue there are three costs you can add.
A statutory interest rate of 8% above the Bank of England’s base rate can be added onto the most recent payments that come after either December 31st or June 30th.
An example of this is if for example during the first six months of the year the base rate from December 31st was 0.7%, you can charge a rate of 8.7% interest starting from the day the invoice became overdue. You will need to show the amount you’re adding in a new invoice.
You can also add fixed fees to the total amount you’re owed:
- £40 for debts up to £999.99
- £70 for debts from £1,000 to £9,999.99
- £100 for debts that are £10,000 and above
You’re eligible to claim if the cost of chasing your payment is greater than the fixed fee. The extra expense can be claimed as ‘reasonable costs’ so you shouldn’t be losing money for chasing any payments. Any debt collection fees can come under ‘reasonable costs.’
Still No Payment?
If a client is still not paying, you can send them gentle reminders which increase to more firm reminders if they aren’t cooperating.
If you need these costs calculating and want to know what you can add onto a payment or claim as a reasonable cost, then please get in touch with our Milton Keynes accountants by calling us on 01908 046964.