More legal news
19 September 2002
Buyers in small firms should brace themselves for the possibility of large suppliers acting on their legal right to hit them with double-digit interest on their unpaid bills, according to new research.
Initial findings from a study of 5,000 large companies found that 92 per cent were aware that they can legally charge interest on outstanding bills.
Interest is normally calculated at the base rate of 4 per cent plus 8 per cent, making a total of
12 per cent.
The third and final part of the government’s Late Payment of Commercial Debts (Interest) Act 1998, which came into effect last month, allows all firms of any size in the public and private sectors to charge interest.
Professor Nick Wilson of the Credit Management Research Centre at Leeds University Business School, which carried out the study, said: “Large firms look ready to act on their right.
“We found one big company charging interest right from the issuing of the invoice. Interest charges and debt recovery could come as a shock to buyers in small companies.”