We strongly recommend that our clients include provision for the recovery of debt collection fees. When these terms are present then our fees are recoverable from the debtor. In Business to Consumer relationships, it is only possible to recover debt collection costs with these terms present. In Business to Business relationships, if terms aren't included then the detail below, taken from gov.uk, are applicable.
When a payment becomes late you can claim interest and debt recovery costs if another business is late paying for goods or a service. If you agree a payment date, it must usually be within 30 days for public authorities or 60 days for business transactions. You can agree a longer period than 60 days for business transactions - but it must be fair to both businesses.
If you do not agree a payment date, the law says the payment is late 30 days after either:
The interest you can charge if another business is late paying for goods or a service is ‘statutory interest’ - this is 8% plus the Bank of England base rate for business to business transactions. You cannot claim statutory interest if there’s a different rate of interest in a contract.
You cannot use a lower interest rate if you have a contract with public authorities. Check the current Bank of England base rate and previous rates.
If your business were owed £1,000 and the Bank of England base rate were 0.5%:
Send a new invoice if you decide to add interest to the money you’re owed.
You can also charge another business a fixed sum for the cost of recovering a late commercial payment on top of claiming interest from it. The amount you’re allowed to charge depends on the amount of debt. You can only charge the business once for each payment.
|Amount of Debt||What You Can Charge|
|Up to £999.99||£40.00|
|£1,000 to £9,999.99||£70.00|
|£10,000 or more||£100.00|
These amounts are set by late payment legislation. You can also claim for reasonable costs each time you try to recover the debt, this can cover any external debt recovery costs such as ours.