In this episode of Minimise Debt, Maximise Cash, host Emma Reilly (CEO of Top Service) is joined by Nicola Hannant (CEMEX) and Paula Swain (Kerns Legal Services) to address practical questions regarding how late payment interest, compensation charges, and recovery fees are handled from an accounting perspective.

Moderated by Philip King (Non-Executive Director), the conversation covers how to document late payment fees on the books, building a business case for implementing charges, and structuring terms and conditions for business-to-business (B2B) clients.

Key Takeaways & Discussion Highlights

• Handling Invoices for Late Payment Charges:

  • Letters vs. Manual Invoices: When escalating debts through a ”letter before action” via a solicitor or partner, a formal invoice is not legally required; the notification letter itself serves as the documentation of charges.

  • Internal Management: For in-house collections, companies like CEMEX issue separate internal manual invoices to record late charges.

• Accounting & Nominal Code Guidance:

  • No Legal Requirement for Invoices: Both debtors and creditors treat late payment charges similarly to bank interest or financial charges rather than standard invoices for goods/services.

  • Bookkeeping: Debtor companies can account for these charges using the notification letter. Creditors should record incoming late interest and compensation as financial charges/income (similar to bank interest) rather than standard sales revenue.

• Building a Business Case for Late Payment Charges:

  • Evaluating Historical Losses: To convince reluctant internal stakeholders to enforce late payment charges, review the company's past 12 to 24 months of write-offs, legal costs, and CCJs.

  • Prioritization Advantage: Applying statutory interest and compensation moves your invoices to the top of a client’s payment priority list, reducing bad debt risks before insolvency occurs.

  • Negotiation Tool: Raising late payment charges often acts as a powerful incentive for debtors to settle the principal debt immediately, even if the interest itself is ultimately negotiated or waived.

• Terms & Conditions: B2B vs. Consumers:

  • B2B Consistency: The Late Payment of Commercial Debts Act applies specifically to business-to-business (B2B) transactions, including sole traders acting in the course of business.

  • Uniform T&Cs: There is generally no need for separate terms and conditions for different business entity types (e.g., sole traders vs. limited companies). However, consumer contracts (non-B2B) require completely separate contracts, as the Act does not apply to non-commercial individuals.

Webinar Announcement

Want to learn more and participate in future live sessions? To sign up for the next webinar, visit:👉 https://www.cicm.com/cicmevents.html

Connect with Us

Have questions about managing late payments or credit management strategies? Reach out on LinkedIn:

• Emma Reilly: Search for Emma Reilly Top Service on LinkedIn.

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