IrelandTogether’s member Grace Boland writes an informative article on legislation aimed at penalising businesses who miss payment deadlines in B2B transactions
What is it?
This legislation is aimed at combating late payments in B2B, commercial transactions and provides that penalty interest and compensation will become payable if payments deadlines are missed. This EU wide law is aimed at improving cash flow for businesses, particularly SMEs but many do not know about it or are not sure how to exercise their rights under it.
What you need to know:
• For commercial transactions, the general payments deadline is 30 days, unless the contract states otherwise.
• It is an implied term of every commercial transaction that the supplier is entitled to statutory late payment interest where the purchaser does not pay by the payment deadline.
• Interest is payable at 8 percentage points above the ECB rate.
• Where the contract provides for a payment term in excess of 60 days, such term must be “expressly agreed” and must not be “grossly unfair” to the supplier. The standard deadline for public authority payments is 30 days.
• Where late payment interest falls due, the supplier is also entitled to the automatic payment of compensation for expenses.
Entitlement to Compensation for Expenses per Invoice:
Amount of Late Payment (Invoice Value) Compensation Amount Not exceeding €1000 €40
Exceeding €1000 but not exceeding €10,000 €70
Exceeding €10,000 €100
• If you are having issues with your clients missing their payment deadlines, as part of your invoice follow up procedure consider reminding them of your right to charge them interest and compensation, per invoice, for the late payment of invoices.
• Consider notifying customers that going forward all late payments will automatically attract the statutory interest and compensation.
• You need to weigh up the commercial relationship you have with your clients to decide whether or not it makes commercial sense to actually start charging them the late payment interest and compensation.
• Where the relationship has broken down, it might be worth reviewing how many times that client made late payments over the last 6 years and consider now charging them the interest and
Get in touch! If you would like to discuss how to use this legislation as a lever to ensure timely payment or would like to discuss how we can help your business, contact Boland Law at:
T: 01 546 1072 E: email@example.com firstname.lastname@example.org