by scowan
21. September 2010 18:19
Can you Charge for Interest Retrospectively?
This is a question we are asked a lot and not just by the many Scottish businesses we work with. The answer is "Yes" although you will have to watch limitation periods – this is 6 years in England and 5 years in Scotland.
When will your purchaser be "late" in paying?
Again we are asked to clarify what actually constitutes ‘late payment’ regularly and for all businesses operating in Scotland it really is something you should know. Payment will be late in the following circumstances:
•If you have agreed a credit period with the purchaser, their payment will be late if made after that agreed date. The agreement can be made orally or in writing.
•If no credit period has been agreed interest will commence 30 days after the later of the following:- 1.You have delivered the goods or performed the service; or 2.The day on which your purchaser has received notice of what is owed to you.
This 30 day period is known as "the 30 day default period". The moral is to both invoice accurately and as soon as possible. If you do not invoice at all or your invoice is inaccurate the default period will not start and you will lose some interest.
What if your contracts provide for advance payment?
•If your contract provides the whole price has to be paid before the goods are delivered or service performed and payment is not made then interest will commence as soon as you have performed your part of the bargain.
•If you have an instalment contract then interest will commence on the day after the instalment is due.