How Late Payments by Customers Impact Your Ability to Repay Commercial Debts

When you run an eCommerce business, you rely on your customer’s payments to make a profit, including your business customers through business-to-business transactions. Your business has payments it needs to make for services provided to it and supplies it may need to purchase. Therefore, cash flow is important. If a customer or multiple customers submit late repayments for unpaid invoices, the overdue invoices could cause complications, particularly for small businesses. It can also cause late payment of your own commercial debts. If you pay your commercial debts late, there will be consequences for you as an eCommerce business. This article will explain how late payments from your customers can harm your eCommerce business’ ability to pay its commercial debts. 

When is a Commercial Payment Late?

It is essential for an eCommerce business owner to understand when a commercial debt payment is late. Often, you and the other business will agree on a payment date for the payment of services or goods one of you provided the other. This will generally be up to 60 days to make payment.

However, if you provide goods or services to another business and neither of you agree on a payment date, the law states what this is. It will either be:

• 30 days from receipt of the business invoice; or
• where the goods or services are provided after this time, 30 days from when you deliver or feed them. 

What Happens if a Commercial Payment is Late?  

If a commercial payment is late, a business can claim interest as well as any debt recovery costs for the late goods or services payment. This means that you can also do this as an eCommerce business if a business customer pays you late. Equally, another business can charge your internet business interest because you are late with their payment. 

Can I Charge Interest on Late Payments?

The law says how much interest your eCommerce business can charge on late payment of commercial debts. This also applies to other businesses, so they can charge your internet brand when you are late with payments. This is statutory interest and is:

• 8% of the transaction cost; and
• the Bank of England’s base rate for transactions between business to business. 

However, if the contract between your internet brand and the other business details a different level of interest, this applies instead. However, this means, of course, that neither of you can claim the statutory interest that applies to late payment of commercial debts.

What Can I Charge for Debt Recovery for My eCommerce Business?

If your eCommerce business is in the unfortunate position of recovering late commercial payments, you can also claim a fixed sum for this cost. This does not affect the interest you charge. If you are late with your commercial payment, a business can also charge your internet brand a fixed sum for your late payment. The charge level for debt recovery of late payment of commercial debts varies according to the level of debt a business owes. The law details what amount a business can charge, which is as follows:

• £40 for any payment of up to £999.99 a business owes;
• £70 for any payment between £1,000 to £9,999.99 a business owes; and 
• £100 for any payment of £10,000 or more.

If your eCommerce business has to try to recover a business debt more than once, the law says you can charge reasonable costs each time.

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Key Takeaways

If your eCommerce business is late with a payment of a commercial debt or another business is late paying you, this can impact your cash flow.

For more information, contact our experienced eCommerce lawyers as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on [number[ or visit our membership page.