Brokerages and other businesses are now able to claim up to £100 in debt recovery costs for overdue payment thanks to new legislation.
Small businesses are already allowed to charge interest on late paid bills, and the new right to charge compensation costs aims to make late payers think twice before offering an excuse for not paying up.
Under the new package, debtors will be liable to pay the creditor £40 towards recovery costs of debts of £1,000 and under, £70 on debts between £1,000 and £9,999, and £100 on debts of £10,000 and over.
Other changes mean the interest rate for late payment will be fixed for asix-month period rather than fluctuating monthly as at present.
Businesses of all sizes and the public sector will be able to use the late payment legislation, which formerly applied to small firms only.
It's estimated that small businesses are owed £7bn in late paid bills at any one time and that approximately 10,000 UK businesses fail each year as a consequence of late payment.
Nigel Griffiths, small business minister, says: “Prompt payment can make the difference between success and failure for a small business.
“Cashflow problems and the time spent chasing debt also prevent business owners from doing what they do best – running their business. This new legislation will ensure that the cash keeps flowing.
“The summer holiday season often sees many creditors being fobbed off with poor excuses. The right to charge for the wasted efforts spent chasing unpaid bills should make slack payers think twice before trying to stall for time.”