Cash is king. No matter how strong your balance sheet, cash flow is vital. Do you have customers who can afford to pay you, but they just delay and delay?

Some help is provided in the form of the Late Payment of Commercial Debt Regulations 2013, as Brachers Paul Dungate explains

• What is the aim of the Regulations?

Encourage prompt payment of invoices, in particular to protect small suppliers from suffering cash flow problems due to late payment.

• When did they come into force?

March 16.

• What types of contracts do they apply to?

Contracts for goods and services but with different implications depending on whether the contract is business-to-business or business-to-public authority.

• How do they affect business-to-business contracts?

If the contract does not contain a specific payment term, payment must be made within 30 calendar days after the customer receives the goods or services, the supplier’s invoice or verification or acceptance of the goods. Interest will accrue on unpaid invoices after that period.

• What if the contract contains a specific payment term?

If there is an express payment term, you can agree that payment will be up to 60 days from the latest date of the listed events. You can agree an extension to the 60-day period providing it is in writing and not “grossly unfair”.

• In what circumstances is an extension “grossly unfair”?

All circumstances are taken into account – whether any extension is a major deviation from good commercial practice, contrary to good faith and fair dealing and whether the purchaser has an objective reason for requiring a change from the statutory provisions.

• How do the Regulations affect business to public authority contracts?

Whether or not the contract has an express payment term, payment must be made within 30 calendar days of the listed events.

• Do the Regulations change the statutory rate of interest that applies to late payments?

No. Interest rates remain at the current level of 8% over the Bank of England base rate.

• Can parties specify a different rate of interest in their contract?

Yes, provided that the rate provides a “substantial” remedy for late payment. The remedy is not substantial if it is insufficient to compensate the supplier or deter late payment and it would not be fair and reasonable to vary the right to statutory interest.

• Can the supplier claim anything else?

Yes. Suppliers can claim a fixed charge for recovering the debt owed plus any other reasonable costs of recovery.

More information on this or any other commercial law issue from Paul Dungate on 01622 776441