The Late Payment Law is all about ensuring that clients pay on time, and if they don’t, you can charge them interest on the invoice amount.
So, you can start using this law the minute an invoice because due, and hence considered late. As per the 1998 Act, if the contract has a specified payment date or deadline, then the payment is late when the deadline expires.
If the contract does not include the payment deadline, then the default becomes 30 days after either;
- Service or goods delivery, or
- Invoice delivery.
Once the verification has taken place, and goods are verified as complying with the stipulated contract terms, then this payment should be made.
However, there are usually exceptions to this rule. For example, if you have an agreement with your client to extend the deadline to more than 60 days, and this is not considered as “Grossly Unfair” to the supplier, then it can be allowed.
The interest in this case would be charged after the 60 days elapse.
Additionally, if there is an acceptable procedure that needs to take place for more than 30 days after the delivery has been made, and it is not judged as being “Grossly Unfair” to the supplier, it is allowed and the interest will be charged after the 30 days are over.
The term “Grossly Unfair” is used when trying to protect the supplier. There should be utmost good faith and fair dealing when conducting business between two parties, and one should not be seen as trying to take advantage of the other party.