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Late Payment Interest

When you have an outstanding invoice with a debtor, you are allowed to add interest to the balance as soon as the invoice becomes overdue. 

However, you cannot simply add any figure to the original amount. The interest rate you can charge will depend on the location of your debtor and the age of the invoice. 

When is an invoice late? 

An invoice becomes late as soon as the due date expires. For example, if your invoice is sent on 1st October with a 30-day payment term, then the money needs to be received by 31st of October. If payment is not received during this time, then as of 1st November, the payment is late.  

When it comes to debt recovery and collecting your money quickly, it is important to contact your debtor as soon as it becomes overdue. This communicates to your customer clearly that late payments are not acceptable, and you will take the necessary actions to get your invoice paid.  

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Can I charge interest on late payments? 

Yes, you absolutely can. When an invoice becomes overdue, you have the right to add interest and costs to your invoice. The interest amount you can charge and the costs you can apply will vary depending on the country of your debtor.  

Late payment costs for business debtors  

We advise you to specify the reminder costs in your general terms and conditions in advance. Our advice is to include at least 15% costs with a minimum of €250, and 1% interest per month. 15% for collection costs is a very common percentage for commercial receivables. Make sure that this is stated correctly in your terms and conditions. Of course, we can always check whether this provision has been included correctly in your general terms and conditions.   

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Debt recovery costs on late payments 

There are other debt recovery costs that you can charge to your debtor. Again however, these are very different depending on the country of your debtor. For example, in the UK, compensation costs can be added depending on the amount of debt: 

Amount of Debt recovery charges in the UK  

Up to £999.99 – £40 

£1,000-£9,999.99 – £70 

£10,000 or more – £100  

For information about what costs you can apply, it’s important to do your research. An international debt collection lawyer will be able to help you with this information.  

What is the rate of interest you can charge? 

The rate of interest you can charge will depend greatly on what country your debtor resides in. If, for example, your debtor is based in the Czechia and has only just gone over the payment date, then you can apply the current interest rate. However, interest rates are revised every 6 months in January and in June. Therefore, if your invoice became outstanding in July last year, you may need to apply 2 interest rates to the unpaid balance. If the invoice is older than a year, you may have to apply multiple rates.  

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How to claim interest 

Once you have calculated the interest you can charge to your customer, the next step is to apply it to the invoice. If you decide to apply compensation costs and interest, you should of course inform your customer by supplying them with an updated invoice that details the extra costs and highlights the new outstanding balance. 

What if a customer objects? 

Although it is legal to apply interests and costs to late invoices, your debtor may not be happy with the added charges. They may even become cross and aggressiverefusing to pay the additional costs.  

Read more>> How to deal with aggressive debtors 

Dependent on the relationship with your customer, you may want to consider other tactics before taking legal action. If the mistake was genuine, then employing the services of a debt collection agency may seem a little over the top. However, regardless of who your customer is, they should be respectful of your business and payment terms. Acting quickly, for example, by calling them and reminding them of their debt, communicates that you are a serious business and not one to be trifled with.  

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Specialists in International Debt Collection

Our 35 international lawyers are specialists in debt collection across Europe. From the moment that you hand your case over to us, we will do our utmost to resolve the matter as soon as possible. Whether this concerns a straightforward debt recovery matter or a complicated legal conflict, we will unburden you.

More information  

If you have an international debtor and would like more information about applying interest rates and costs, give us a call. Our team of specialist debt collectors and lawyers can help.  

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