One of the more annoying aspects of the freelance life is the slow-paying client. Fortunately, the law provides freelances with the tools to get the debts paid, in the form of the EU Late Payment Directive, which has been inplace in the UK since 2013. Under the terms of the directive, 60 days after fulfilment of contract, the debt becomes late and the creditor is entitled to charge reasonable costs and interest (at the Bank of England base rate plus 8%) on the debt.
Now, there’s a bit in the bumf that needs explaining. It tells you to work out the interest on the following basis.
Debt x interest rate x number of days late / 365.
What it should say is to express the interest rate as a decimal – 0.085 not 8.5. I didn’t realise this until an accountant friend pointed it out.