The Growing Dangers of Late Payment for Businesses that Pay Late

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 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

Posted by Alec at 2:34 pm, August 16, 2008

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What Details Need to Appear on a VAT Invoice for Courier Services in the UK?

There are strict, but thankfully very simple, rules for what needs to appear on a VAT invoice in the UK.

To satisfy HMRC you need to include on your invoice:

The date of issue of the invoice.
A sequential number that uniquely identifies the invoice.

Your business’s name, address and VAT registration number.
The name and address of your customer.
Your customer’s VAT registration number (only if they’re VAT registered in another EU country and you’re invoicing without VAT).
The date of supply of services (the date you did the work).
A description of the services supplied (from a VAT point of view ‘Courier work’ would be OK – your customer may want more detail).
The VAT rate applied (normally 17.5%).
Total amount of VAT payable.
The total amount payable for the whole invoice excluding VAT.
The total amount of VAT charged at each VAT rate (normally just one entry for the 17.5% rate).
The unit price of the services supplied and the number of units charged for – if this is normal practice for your industry (as far as I’m aware it isn’t normal practice in the courier industry) or required by your customer. In practice you can ignore this unless you charge your customer by an agreed price per mile or hour worked AND they’ve asked you to include the figure on your invoice. For example ‘200 miles @ 70p/plm’.

To satisfy Companies House and Trading Standards:

If your business trades under a name other that its actual Read More…

Posted under Accounting Systems, Courier Basics, Courier Business, Courier Financial Issues, Late Payment, VAT

Posted by Alec at 7:32 pm, August 5, 2008

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Statutory Interest and Late Payment Charges

The Late Payment of Commercial Debts (Interest) Act 1998 gives you the right to claim interest and compensation for late payments.

This is a statutory right – your customer doesn’t have to agree to it, you don’t have to inform them in advance that you intend to charge them if they pay late and you are not permitted to agree in advance to waive late payment fees unless a suitable alternative form of late payment penalty is agreed.

For invoices up to £999.99 you can charge £40 PER LATE INVOICE. For invoices of between £1,000.00 and £9,999.99 you can charge £70 PER INVOICE. You can also charge interest on a daily basis, currently at a rate of 13% per annum.

You don’t charge VAT on the late payment or the interest and you don’t charge the late payment fee on a recurring basis.

You don’t HAVE to charge the late payment fee but unless you’ve specifically agreed to waive the fee the late payer still owes it to you EVEN AFTER THEY’VE PAID THE ORIGINAL DEBT. The Read More…

Posted under Courier Basics, Courier Business, Courier Financial Issues, Late Payment, Legal Issues

Posted by Alec at 5:19 pm, August 2, 2008

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Late Payment and Poor Credit Control in the Courier Industry

For some reason there’s a lot of criticism, mainly coming from ‘old hand’ courier companies, about owner-drivers and small same day courier companies ‘moaning’ about being paid late by other courier companies.

While the people ‘moaning’ and threatening to ‘name and shame’ are widely lambasted as being unprofessional, unbusinesslike and not taking normal business practice into account, I can’t help thinking that maybe it’s the ‘old hands’ that have got it wrong.

Should it really be acceptable that new entrants to the business are forced to fall into line with the pre-existing sloppy practices of the courier industry? ‘Real’ businesses don’t allow elastic lines of credit to unchecked, untested and undeserving customers; why is the same day courier industry so different?

Why are the new entrants, at the bottom of the ladder, forced to accept late payments that are mainly caused by the slack credit control practices of the courier companies they subcontract to?

It’s not so much the late payment that’s a problem with some companies it’s the fact that when they take advantage of extending their suppliers’ credit terms they’re sitting on an enormous pile of debt. Lending your hard earned cash to anyone in this industry is a very risky step to take, more so now than ever before.

Even with its shaky finances in the recent past Nissan is a Read More…

Posted under Courier Business, Courier Financial Issues, Late Payment

Posted by Alec at 6:42 pm, July 16, 2008

The sole trader I was dealing with now claims to have been a limited company with no funds

Well you can serve any documents at the registered office address that’s registered with Companies House and they’re counted as being served whether they’ve moved or not. So that’s no problem.

Did you get any written confirmation of your booking? If it didn’t have the full company details on it then you should have a good case for making the sender personably liable anyway.

Posted under Courier Financial Issues, Late Payment, Legal Issues

Posted by Alec at 12:43 pm, July 3, 2008

limited company ignoring court judgement against them

Well it looks like you’re owed more that £750, so you could go for a winding up order – that always concentrates the mind. If the company’s worth nothing then that could backfire on you though.

If you maybe know a large customer of theirs that’s likely to owe them a lot of money you could get a third party debt order and claim your money direct from their customer.

Your best bet’s to get some proper legal advice.

Posted under Late Payment, Legal Issues

Posted by Alec at 3:14 pm, July 1, 2008

Alliance Boots has said that it will pay its suppliers up to 105 days after billing

Alliance Boots has said that it will pay its suppliers up to 105 days after billing and (if that wasn’t enough) will then charge a 2.5 per cent “settlement fee”. It’s enough to make the eyes water, and despite Alliance Boots claiming that their procurement standards “are in line with those of other groups of similar size and scale”, the news will come as a hammer blow to suppliers who are coming under increasing pressure as times get tough.

I suppose there’s nothing wrong with that if it’s been agreed to before the supplier sets their prices, at least they’re up front about it.

I don’t think that I’d be rushing to do business with them, but they’re a better credit risk than most and presumably their suppliers factor in the extra costs caused by slow payment when they negotiate their rates.

If you think of it as more like a discount for payment within the agreed terms then it seems more acceptable.

As I say, providing the suppliers have agreed the terms and set their prices accordingly then I don’t see a problem with it.

I’m thinking of going into Boots and asking if they’ll offer the same terms to their customers as they require from their suppliers.

Posted under Late Payment

Posted by Alec at 12:25 pm, July 1, 2008

Invoicing & Paperwork

While we’re on this subject can I point out to all our suppliers that in future we will only accept invoices printed on mauve-tinted 100gsm laid paper and delivered by carrier pigeon.

With up to TWO supplier invoices to handle a day we really don’t see why we should accept invoices delivered in any other fashion.

Oh and you can stick your £40 late payment charges where the sun doesn’t reach because in our opinion a message on a chat page is service of our notice to you that this is how we require our invoices delivered. Despite this it goes without saying that delivery of invoices by similar means is unacceptable.

Posted under Courier and Freight Exchanges, Courier Basics, Courier Financial Issues, Late Payment

Posted by Alec at 6:30 pm, June 17, 2008