On the other hand, ”composite interest” reintegrates the accumulated interest in the capital, so that from that date, interest is paid on interest. ”Simple interest” means that interest is calculated by reference to the principal amount of the due, but interest is not added, so the interest will be the same each month. If the designer receives payment from the client more than 15 days after the accounts close, the designer may collect a late fee of $50.00. If the designer receives the customer`s payment more than 30 days after the accounts close, the company can assess the interest of one percent of the outstanding balance for each month or part of the month in which the balance is not paid. Interest is collected retroactively from maturity. If the client has not paid an invoice for more than 90 days, the company may pass the collection of the outstanding amount to a lawyer or collection agency. When the client`s unpaid invoices are returned to a lawyer or collection agency, the client must pay all appropriate legal or collection fees in addition to late fees and accrued interest. Under the Late Payment of Commercial Debt Act 1998, a supplier of another company has the right to calculate late interest of 8% per year above the base rate. This term is implicit in contracts for the provision of goods and services between companies. Any attempt to exclude the provision is not immediate, unless the contract contains another essential remedy in the event of a late payment.
Although the interest rate is high, the total amount of money can be only a few pounds. Think about what the interest and cost burden could do for your relationships with your customers. Interest is calculated at 8% above the Bank of England`s basic interest rate, plus a fixed ”collection fee” of $40 to $100 per debt. The proposed changes to EU legislation do not affect the interest rate, but may levy a single fixed collection tax. The issue of ”late payment in commercial transactions” is governed by the European Communities (Late Payment in Commercial Transactions) 2012 – SI 580 regulations of 2012. If no credit term is agreed or fixed, the law sets a delay of 30 days after the later date: clearly defined late penalties encourage prepayment or at least punish late payment. Three fundamental penalties that escalate would be: ”Companies must weigh the decision to charge late interest. Although it is a legal right, each step could have an impact on current business relationships. ” – Glenn Collins, Association of Chartered Certified Accountants The legal right to interest and compensation applies to all contracts.