Read below some Frequently Asked Questions.
What are payment terms?
Payment terms and conditions are used when goods and services are supplied but payment for them is settled a later date, this is known as Trade Credit. Payment terms set out when the bill or invoice for goods and services must be settled. Where payment is made outside of the agreed terms and conditions, the payment is late and late payment charges can be applied.
Are there legally defined limits on payment terms?
If the goods and services are procured by a public sector body, payments should be made within 30 days of that body receiving and accepting the invoice.
Where goods and services are procured by a private sector business, payment terms between the parties are usually agreed in advance and should not usually exceed 60 days from the date the invoice is received.
However, payment terms between parties can be extended where mutually agreeable and if they are not grossly unfair on one of the parties.
Where payment terms have not been agreed in advance between businesses, or where goods/ services have been supplied using trade credit, the payment terms default to 30 days from when the invoice is received and accepted.
I’ve always paid my suppliers on time but due to my current financial circumstances, I’m unable to do so. I’m worried one of them might sue me, can I prevent them from doing that?
The economic environment resulting from the Covid-19 pandemic has resulted in challenges for businesses of all sizes, with the smallest businesses being impacted the most due to a lack of financial resilience.
If you are experiencing cashflow difficulties, we would recommend discussing the issue with your suppliers at the earliest opportunity and working in partnership to manage the situation. The Commissioner has urged business to work in collaboration to ensure that cashflow and liquidity is maintained through the supply chain.
Speak to your bank to discuss the options available to you, or contact the Business Support Helpline for further advice.
You should also check your own accounts to identify any monies that are overdue from your customers, and contact them to discuss how the account can be settled. Contact the OSBC for advice if you are encountering late payment delays that you are unable to resolve.
I’ve received an email from a well-known company telling me that they are not going to pay me what is already due, and they are extending payment terms on all future invoices by an additional 90 days. What can I do?
In the first instance contact the company and speak to the accounts payable or procurement team to discuss the issue, and explain the impact that the delay in payment will have on your business.
Payment terms should not be extended longer than 60 days unless both parties agree and the revised contract terms are not grossly unfair to one of the parties.
If you are unable to resolve the issue, contact the OSBC and we will investigate by working with both parties to make recommendations and resolve the dispute.
I have chased one of my largest customers for payment but they are simply ignoring me. How can I get them to pay me?
Where you have attempted to resolve the outstanding debt yourself without success you can contact the OSBC for advice and support. The Commissioner may be able to investigate your dispute and make recommendations to resolve the matter. The Commissioner has helped small businesses unlock over £7.8m in unpaid invoices. In cases where the Commissioner is unable to investigate your dispute, we will do as much as we can to help you resolve the situation.
How much does it cost to use the services of the Small Business Commissioner?
There is no charge. The role of the Small Business Commissioner is funded by HM government. Support, advice and the Commissioner’s complaint scheme is free to access and available to all small businesses.
How do you define a small business?
A small business in defined as a business with less than 50 employees.
How do you define a large business?
A large business in defined as a business with more than 50 employees.
Does my dispute have to be with a larger business?
Yes, the Enterprise Act 2016 which supports the appointment of the Commissioner states that complaints can only be investigated if the dispute is against a large business.
However, where the Commissioner is unable to investigate a complaint we will do as much as we can to advise, support and signpost a business to alternative ways of resolution.
Where do the OSBC publish reports about the poor payment practice of large business?
If the outcome of an official complaint investigation reveals poor payment practice, the Commissioner can publish a report highlighting details of the complaint, and may identify the businesses involved. Reports can be viewed here.
What are poor payment practices?
Poor payment practices include late or non- payment but could also include:
- Payment terms that are grossly unfair or set beyond the statutory requirements without mutual agreement
- Compulsory discounting or promotional charges without consultation
- Contractually stipulated deviations to late payment remedies that do not provide adequate redress
- Excessive delays in resolving invoice dispute
Does the dispute specifically have to be about late payment?
Yes, the dispute must be specifically related to late payment, or non-payment. Disputes regarding quality, timeliness or contractual agreements are outside the scope of the Enterprise Act 2016. However, the Commissioner provides signposting and advice to alternative ways to resolve the dispute and can facilitate structured conversations between the parties which are both agreeable.
Can you help with contract advice?
We are not qualified to provide legal advice on the content of a contract, interpretations or agreement. However, we do provide general advice regarding payment terms and conditions, and the impact they may have on a business. We recommend seeking independent legal advice where a business has contractual concerns. You can search for a legal adviser, solicitor or barrister here.
What if my dispute is with another small business?
The Commissioner can only investigate disputes between small and large businesses. Where disputes arise between small businesses, we continue to provide support and signposting to dispute resolution solutions. Where both parties are agreeable, we can also facilitate informal conversations between the businesses to reach a mutually acceptable solution.
Can you handle complaints from the construction sector?
No. Complaints from the construction sector or work undertaken under the Housing Grants, Construction and Regeneration Act 1996, are outside the remit of the Small Business Commissioner. “The Construction Act” sets out a legally defined dispute resolution system with legally binding independent adjudication. The Commissioner will continue to support and signpost businesses involved in disputes in this sector to alternative methods of resolution.
Can you deal with payment problems with a public sector body such as a Local Authority or the National Health Service (NHS)?
The Commissioner can only investigate disputes between businesses in the private sector. Disputes with public sector bodies are investigated by the Public Procurement Review Service (PPRS).
I have a disputed invoice, what can I do?
The value or reason for an invoice can be legitimately disputed, but this dispute should be communicated to the creditor as soon as possible. There is no legally defined period that an invoice can be placed in a dispute for, but it is incumbent on the parties involved to take all reasonable steps to resolve the dispute as soon as possible. Where a creditor considers that either the dispute, or the time taken to resolve the dispute is not reasonable, you can contact the OSBC and we may be able to investigate. View advice on how to prevent unnecessary delays and disputes here.
I have an unpaid invoice with a large business based abroad, can the OSBC help?
The OSBC can only investigate complaints about businesses where they have some form of UK presence, for example an office or factory within the UK (United Kingdom). The OSBC cannot investigate complaints about businesses that have no UK operation, or are based entirely overseas. However, we can provide advice on signposting regarding chasing unpaid debts by overseas business.
When is a late payment considered to be a late payment?
A payment is late after an invoice has been issued and accepted, but payment has not been paid within the agreed payment terms.
When can I claim interest and compensation on a late payment?
The Late Payment of Commercial Debts Act and subsequent amendments allow creditors to charge interest and compensation on late paid debts at statutory levels where an invoice has not been paid within the agreed payment terms. Statutory remedies for late payment can be varied in a contractual agreement, but the contractual remedy for late payment should still be significant and broadly equivalent to statutory levels.
Use the interest calculator tool on our website to work out how much interest and compensation to charge on your unpaid invoice.
Can I claim late payment interest and compensation on a disputed invoice?
No, you are unable to claim interest or compensation for an invoice that has been legitimately disputed by a debtor. Late payment charges are applicable when an invoice has been accepted, but payment has not been made within the agreed payment times. The payments term begins at the point that the invoice has been received and accepted. If you consider the dispute to be unreasonable or believe it has taken an unreasonable amount of time to resolve, contact the OSBC and we may be able to investigate the complaint and make recommendations to resolve the dispute.
I am afraid that that my complaint about payments may damage future trading relationships with my client, what should I do?
Most businesses act positively, responsibly and will actively engage in payment disputes to find a satisfactory resolution to both parties. The OSBC aim to resolve disputes amicably and protect the trading relationship between businesses. However, where a business has ongoing concerns about identifying themselves as part of a dispute, the OSBC can handle these disputes confidentially and protect the anonymity of the complainant. However, complaint anonymity also places a number of limitations on dispute resolution and reduces the level of action that we can take.