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A Complete Guide to Adding Unpaid Invoice Interest in Construction


The Construction industry is known as a tough sector for getting paid. Our list of the worst companies in the UK for payment performance includes many construction companies. One approach you can take to help focus the mind of a business customer that is holding onto your money beyond the agreed payment date is to add interest to the amount they owe you.

Read our: Step by Step Guide to Getting your Invoices Paid on Time in Construction

The UK has had late payment legislation since 1998 which gives you the right to charge interest on invoices that other companies have not paid on time. The original legislation only applied to debts owed by large firms and public sector bodies, but in 2002 the rules were extended to cover debts owed by any business of any size.

In addition to putting interest on top, you are also entitled to add a late payment fee to the bill and reasonable recovery costs too, creating the opportunity to use a collection service such as our online CreditXS service. We give you the option to add our fee to the amount to be collected, so if the customer pays the whole amount, you effectively get the service for free and can get on with running your business while someone else worries about collecting the money for you.

Because it is a statutory right, you do not have to refer to it in your Terms and Conditions, but wed recommend that you make things clear from the start and put something like this in your T&Cs going forward:

We reserve the right to add late payment interest, compensation charges and recovery costs to overdue invoices in accordance with The Late Payment of Commercial Debts Regulations 2013

How Do You Calculate Late Payment Interest Charges?

The easiest way to calculate how much to add is to use our free online calculator.

If you're using our online debt collection service (CreditXS) to collect an overdue invoice then you will be given the option to add interest and fees to the amount and the system will automatically calculate the amounts for each invoice.

If you want to do it yourself, then this article gives you the full details on how it should be calculated.

Should You Always Add Late Payment Charges?

Just because you can do something doesn't mean that you always should. Charging interest and compensation is your choice, and might not always be the right way forward.

The fault may not be 100% that of your customer. Sometimes the customer didn't get the invoice or may have raised a query on the invoice that they feel wasn't resolved.

You may have a long-term trading relationship with your customer and decide it's better to maintain good relations for the future.

So think of this right as a useful tool to help train your customers to pay you on time!

Useful Links:

Submit an Overdue Invoice Online for us to Collect
Late Payment Interest Calculator
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