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Interests (Moderator: Charging interest for late payment)
Thread poster: Alterlingua
Local time: 23:44
English to French
+ ...
Nov 27, 2002

Dear all,

I just wanted to know if some of you ever charged interests for late payment. And if so, what is the common (european) rate per month?

Thank you very much in advance!


[ This Message was edited by:on2003-01-30 21:22]

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Khulan Shiiter  Identity Verified
Local time: 05:44
Member (2003)
English to Mongolian
+ ...
I agree with you on this... Nov 28, 2002

Yes, I absolutely agree with you on charging interests (or penalties) for late payments. Although, I have never done this, I think we should charge. It would be very useful to get some information on appropriate rates. Thanks.

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Ralf Lemster  Identity Verified
Local time: 23:44
English to German
+ ...
Depends on the country... Nov 29, 2002

...although the interest rates set by the ECB apply to the whole of the Eurozone, the situation regarding interest claims for late payment of invoices is probably different in each country, and may differ if the debtor is in a different country.

I suggest you check with your local chamber of commerce.

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Carmen Cuervo-Arango  Identity Verified
Local time: 23:44
English to Spanish
+ ...
Late Payments in Commercial Transactions Regulations 2002 Jan 29, 2003

Ailish Maher, the Spanish - English coordinator in our translation group, has just sent me a very interesting link about this subject. It is a EU wide law which came into effect on 7 August 2002 and speaks about penalty interest that become payable if payments for commercial transactions are not met within 30 days.

For the whole document:

Q3. What is the interest rate and how do I calculate the interest charge?

Unless otherwise specified in an agreed contract, the penalty interest rate is the European Central Bank main refinancing rate plus 7 percentage points. The ECB rates in force on 1 January and 1 July apply for the following six months in each year. Only one rate will apply to a late payment - that is the rate in force on the payment date.

The interest rate in force on 1 January 2003 was 9.75% pa (that was the current ECB rate of 2.75% plus the margin of 7%). That rate equates to a daily rate of 0.0267%. Penalty interest due for late payments should be calculated on a daily basis.

To calculate the interest due on a late payment the amount of the debt should be multiplied by the number of days in excess of 30 for which the payment is late and by the daily interest rate in operation at the time.

For example

On a debt of €1000 that is outstanding for 50 days (i.e. payment is late by 20 days), the calculation is as follows;

€1000 X 20 X 0.0267 = 534 = €5.34

The purchaser should then settle the new debt of €1005.34 plus compensation for recovery costs if applicable.

You may of course set your own interest rate and payment period in agreement with the purchaser.

Q4. Do I calculate inclusive or exclusive of VAT?

You should charge interest on the gross amount of the debt including any element of VAT.

Q5. How much compensation am I allowed and how do I claim it?

Compensation may be claimed for the recovery costs of the debt if such costs arise. As it may prove to be very difficult to calculate the actual costs of pursuing a debt, the following \'Flat Rates\' can be used:

Amount of late payment Compensation

Not exceeding €1000 €40

Exceeding €1000 but not exceeding €10,000 €70

Exceeding €10,000 €100


I think this is a very nice reference!


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sylver  Identity Verified
Local time: 05:44
English to French
Warning on interest rates Jan 30, 2003


On 2003-01-29 15:13, ablines wrote:


On a debt of €1000 that is outstanding for 50 days (i.e. payment is late by 20 days), the calculation is as follows;

€1000 X 20 X 0.0267 = 534 = €5.34

The purchaser should then settle the new debt of €1005.34 plus compensation for recovery costs if applicable.

These may be the official rates, but I would strongly advise against it. Frankly, if you had a choice, would you bother to wait 2 months for 7 euros on 1000. Of course not!

But on the other end, a client will use such a rule to ease his mind into some kind of a thinking like \"If I am tight, no problem, I will just pay later with the interests\".

Since you put such a rule, it means that you kind of accept late payment.

We are not banks. That\'s not our job to grant credits.

So by proposing small interests rates, you are actually justifying late payments, instead of being dissuasive.

If you want to try the interest line (I have been considering it recently) I suggest something like 15% per month of delay. THAT is dissuasive, because the guy really knows he will be up to his nose in it.

However, the truth is that you are seldom in position to actually enforce payment, much less payment of interests, and when the guy actually pays late, he will usually skip all together that interest clause, and you won\'t be able to get the interest anyway.

That\'s just my opinion.

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Jennifer Thomas  Identity Verified
United Kingdom
Local time: 22:44
French to English
interesting Jan 16, 2004

I have needed to look into this today. I have a new customer, whom I have done two fairly large jobs for. We agreed payment terms of 30 days. Due date came and went. After one week overdue I sent a polite reminder which was ignored. Then today I resent a reminder asking for action. The reply came, with apologies, that they have experienced debt problems due to a large customer not paying them. They say the best they can do is to treat invoices in chronological order and pay them as and when the agency themselves receive money. I get the impression I am fairly far down the line!

I have mentioned to the customer that I am within my rights under EU directive 2000/35/CE to charge 9% interest (current ECB 2% refinancing rate, plus 7%) as from the first day after payment falls due, but I have not yet taken this action.

I thought maybe this meant I could impose a flat late payment penalty of 9% per invoice. As you say, per annum would hardly be worth getting the calculator out for. Per month, now that should be an incentive.

I would like to know this: under this directive, I am within my statutory rights to claim late payment penalties, BUT how commonly do translators use this right in practice, AND is it likely to get you chucked out of the agency's pool of translators?

Also, I thought of adding this late payment penalty to the terms of each invoice, but is this a real "no-no"?

I also found this user-friendly guide to the directive:

[Edited at 2004-01-16 17:34]

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Anne Gillard-Groddeck  Identity Verified
Local time: 23:44
German to English
Interest Jan 16, 2004

The interest that is payable is statutory interest, so that it should not be necessary for the creditor to "claim" it. It is payable automatically once the deadline has been overstepped. Thus if the amount is paid after 30 days without interest, the client is in breach of contract unless you have an agreement stipulating later payment. In the absence of such an agreement the debt has not been discharged.

Of course, there is nothing to stop you demanding earlier payment, in which case you would have to claim (reminder).

It would seem that many debtors/clients are ignoring their statutory duty to pay interest after 30 days and not just in this area. It seems that the non-payment problem is just being passed down the chain until it reaches the weakest link which was actually what the legislation was intended to combat.

However the only way to enforce the legisliation is to sue. Whether you wish to do this is, of course, entirely up to you. Presumbly creditors are not enforcing their rights for fear of losing business.

[Edited at 2004-01-16 20:29]

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Anjo Sterringa  Identity Verified
Local time: 23:44
Member (2003)
English to Dutch
+ ...
delays are inevitable Jan 16, 2004

If you have a look at the link with the EC brochure on this directive, you will see some statistic information on payment terms and AVERAGE delay...
You will have to take some delay into account, even if it is not 'fair'. As a translator, the debtor is often a translation agency - I think most of them eventually pay- if not they are out of business. (unless the company folds of course).

Good luck,

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Anne Gillard-Groddeck  Identity Verified
Local time: 23:44
German to English
Some strategies Jan 17, 2004

An agency may well be experiencing debt problems due to a large company not paying a bill and be "caught" in the middle. However the agency has a responsibility to organise its business in such a way that this will not happen. This can be done as follows:

1) By issuing a "better practices" leaflet to its customers explaining that the work is carried out by independent contractors who have a right to be paid on time and that the agency is under a legal obligation to do this.

2) Explain the damage that late payment is doing to the company's reputation and also to the agency's reputation.

3) Explain that this will inevitably have consequences on the quality of the work as good contractors will refuse work in future.

4) Explain that late payment practices damage the economy, possibly adding that a large company of the type in question surely has staff with sufficient education to understand this.

Agencies should make a credit check on customers before accepting work from them.

A translator could also issue a "mini best practices" leaflet for agencies.

If an agency tells a translator that it has debt problems, the translator should NOT work for this agency again.

The translator should make this perfectly clear to the agency.

Finally an obvious point is that the independent contractor really should be independent.

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