Unless you state otherwise, an invoice is due within thirty days of the invoice date. You should state the terms on your invoices and to make it even more obvious, the due date itself.
If an invoice is not paid within this time, you are entitled to charge interest. This is not compulsory, but if you do, you should charge it at the Bank of England base rate plus eight percent and apply this to the gross (no VAT is chargeable on the interest itself). Your invoice must state that you reserve the right to charge interest.
You could also set out your terms of trade in a terms and conditions document which should be issued to your customer. This document could then go into more detail, such as setting out any credit limit applicable and the criteria to qualify for any discounts you permit, as well as reiterating the items above.
If you do decide to incorporate any of the above into your terms and conditions and invoices, you need to notify your customers about this change and this should be done in writing. And if you later do intend to exercise your right to charge interest, you should issue a letter to your customer that the payment is late and if the invoice is not paid within, say, seven days, interest will be charged.
If all else fails, there is also the last resort of court action.
To discuss any aspect of record keeping or credit control, please contact your local TaxAssist Accountant who will be happy to help.
By Jo Nockels
Disclaimer: Advice shared in this blog is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this forum, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.