In the current business climate most same day courier companies are more concerned with how quick they can collect the money due from their customers than they are with whether they pay their suppliers late. Quite often all the money coming in goes straight out to the ‘important’ creditors – fuel card company, van hire, landlord, drivers’ wages etc, leaving the ‘less important’ suppliers to wait for their overdue payments.
I’ve warned many times of the dangers of running businesses like this and it seems from anecdotal evidence that some companies are finally having to count the cost of paying their suppliers late.
With the soaring cost of fuel and the general slowdown in the economy it seems that some transport company owners have decided that it will be more profitable to cease their transport operations and concentrate on collecting the outstanding debts accumulated under the late payment legislation.
The Late Payment of Commercial Debts (Interest) Act 1998 (see http://www.payontime.co.uk for further information) gives businesses a statutory right to claim daily interest from other businesses for the late payment of commercial debt. In addition businesses have the right to a compensation payment of between £40 and £100 for each invoice which is paid later than agreed terms. If no terms are agreed then the terms default to the later of 30 days from the day the service is performed (for pre-agreed amounts) or 30 days from the date the cost is confirmed.
Both the interest and the compensation payments are chargeable on each invoice paid late, are payable on demand and are claimable up to six years after the date they become payable – i.e. up to six years after the payment becomes late. They are payable even after the initial debt has been paid in full.
Companies are potentially storing up a time bomb by paying their customers late. As an example, a courier company which carries out 5 local jobs per week for a customer over a 6 year period, each one of which is invoiced on a separate invoice and each one of which is paid late, could potentially issue a claim after 6 years for £62,400 against that one customer in late payment compensation charges alone.
If a company issues just 25 invoices each week which are paid late Read More…
Posted under Courier Business, Courier Financial Issues, Late Payment, Legal Issues