Why Statutory Interest Rarely Works, and What Does

Update, July 2026: this post describes what we have seen up to now, when statutory interest was a manual toggle somebody had to remember to switch on. With SAFE CRM it becomes a stage inside an automated credit control sequence, which lowers the effort of using it considerably. Whether that changes how many resellers actually charge it is an open question, and we will revisit this post once we know. The argument below is about relationship cost rather than effort, so we expect most of it to hold. If you want to work out the figure on a specific invoice, use the late payment interest calculator on the company site.

On a qualifying commercial debt, the Late Payment of Commercial Debts (Interest) Act 1998 lets you charge 8% above base rate, plus fixed recovery costs of £40, £70 or £100. A rate set in your own contract displaces it, except with a public authority, where you cannot go below the statutory rate. SAFE CRM works the figure out for you and raises it as a separate charge invoice, with a record of how it got there.

Almost nobody turns it on. After two decades of running this platform for UK telecoms resellers, the honest pattern is that statutory interest is a feature people are pleased to know exists and rarely actually charge. What recovers the cash is chasing letters, sent on a predictable schedule, with the wording stepping up each time. That is our experience across our own customers rather than a measured comparison, and we say so plainly below.

This post explains both. The interest mechanics, because they are useful. The dunning sequence, because it is what works.

Key Takeaways

• Statutory interest is 8% over the Bank of England base rate, plus fixed recovery costs of £40, £70 or £100 (GOV.UK, 2026)
• A rate in your own contract displaces it, but never below the statutory rate for a public authority
• SAFE picks the rate that applied when the debt went overdue, and keeps a record of the working
• Across our own customers, scheduled reminders are used far more often than interest charges
• That is experience, not a measured comparison between the two approaches
• The wording should step up: friendly reminder, formal notice, final demand with stated next steps

Key terms in this article

What is statutory interest?

Statutory interest is the late-payment interest provided by the Late Payment of Commercial Debts (Interest) Act 1998 for qualifying commercial debts. It is 8% above the relevant Bank of England base rate. Fixed recovery costs are separate: £40, £70 or £100 depending on the debt. The reference rate is the one in force on the relevant 30 June or 31 December date and stays fixed for that debt (2002 Order, article 4).

What is a dunning letter?

A dunning letter is a reminder sent to a customer with an overdue invoice. The word comes from the practice of repeatedly asking for payment. A sequence can mix email, letter, SMS, call tasks and review tasks. How many and how often is your policy, not a legal timetable.

What is aged debt?

Aged debt is the money your customers owe you, broken down by how long it has been outstanding. The buckets are usually 0-30 days, 31-60 days, 61-90 days and 90+ days. The older the debt, the harder it is to collect.

How Statutory Interest Works in SAFE

If you decide to charge, SAFE CRM applies a late-payment profile chosen by the chase stage. A profile can allow a fixed fee, interest, or both, and holds the rates and bands that applied at each point in time.

When an invoice becomes overdue:

1. The daily chase run reaches a late-payment charge stage.
2. SAFE checks the invoice is issued, overdue, still collectible and not excluded by your policy.
3. It works out what was actually unpaid over the period, then applies the rate and fixed-fee band that were in force at the time. That rate is 8% over the Bank of England base rate from the preceding 30 June or 31 December, and it stays fixed for the life of that debt rather than moving with later rate changes.
4. It raises a separate charge invoice, recording the source invoice, the period, the principal, the rate and the band used.
5. It will not charge the same fixed fee twice, or the same interest period twice. If the account is flagged as vulnerable, two people have to approve the charge before it is raised.

The rate is generous to the supplier. For debts that fell overdue in the second half of 2026 the base rate is 3.75%, so the statutory rate is 11.75% (Bank of England, 2026). On £5,000 left unpaid for 90 days that is £144.86 of interest, plus £70 in fixed recovery costs. Meaningful money on paper. You can try another date and amount with the late payment interest calculator.

Why Almost No-One Turns It On

What follows is what we have seen our own resellers do, rather than an industry statistic.

The customer is not surprised they owe interest. They are surprised the supplier they have worked with for five years suddenly cares enough to claim it. The relationship signal is “I no longer trust you to pay me”, and the customer reads it that way.

The interest is rarely paid. We have watched customers settle the original invoice and simply argue about the interest, which leaves you a second, smaller balance to chase.

It works once, on a customer you are willing to lose. As a last resort against an account you are about to fire, it does the job. As routine practice across customers you want to keep, the resellers we know do not use it that way.

From our experience: the customers we have who run with statutory interest enabled are in two camps. The first camp uses it as a credit-control signal: they invoice with the clause visible but only ever switch the calculation on for specific accounts in dispute. The second camp tried turning it on across the board, had a difficult quarter of customer pushback, and turned it off again. The realistic adoption rate across our customer base is in the low single digits.

What Actually Recovers Cash

A chasing sequence, sent on a predictable schedule, with the wording and the action adjusted by debt age. The mechanics are unglamorous. We have not run a controlled comparison of one schedule against another, but this is what our resellers rely on.

An example sequence for 30-day commercial terms:

Letter 1, friendly reminder, 7 days after due date. A short note: invoice X, dated Y, was due on Z and remains unpaid. If payment has crossed in the post, please ignore this. Otherwise, please remit at your earliest convenience.

Letter 2, formal reminder, 21 days after due date. A firmer note: invoice X is now 21 days overdue. Please remit within 7 days. If there is a query, please contact us directly.

Letter 3, final notice, 35 days after due date. A formal final notice: invoice X is now 35 days overdue. If payment is not received within 7 days, the account may be passed to debt recovery and services may be suspended.

Phone call, 50 days after due date. Automation stops being enough. The reseller picks up the phone.

The exact intervals vary by reseller and customer base. The principle is consistent: predictable timing, escalating tone, clear next step.

Why the Sequence Works

Three reasons.

Most overdue payments are administrative, not deliberate. The invoice missed a payment run, reached the wrong contact, or was approved and never released. An early reminder gives the customer an easy way to fix it.

The escalation is real. Each contact states the amount, the due date and what happens next, and each one is firmer than the last. Your team can see the whole history, so nobody starts the conversation again from scratch.

Phone calls work when letters do not. A call or a review task brings a person in at the point where the customer either has a real problem to talk about or has been stalling. It is also where you find out about a dispute, a promise to pay, or a customer in genuine difficulty.

Configuring Dunning in SAFE

SAFE CRM picks a chase pipeline for each customer and runs it every day. A pipeline can set a minimum balance worth chasing, whether accounts join automatically, which days count as working days, and what hours you are willing to send in. Stages can run on their own, create work for someone to review, or wait to be done by hand. A few specific notes:

• Stages can be timed from the due date, before or after it, or from the previous stage.
• Actions include email, letter, SMS, a call task, a review task, a late-payment charge and a restriction review.
• A hold can stop contact, charges or restrictions until a date you choose. Useful for an account in dispute.
• Payment arrangements record a promise or an instalment plan with a grace period. Break the arrangement and the account comes back onto the worklist.
• Nothing goes out without a final check on the balance and your exclusions, so a customer who has just paid is not chased.

Aged Debt as the Reseller’s Real Metric

The point of all of this is the aged debt position, not any individual interest charge. Track the shape of the report and your debtor days trend together, then look at the disputes, arrangements and very old balances before drawing a conclusion. There is no single healthy mix that suits every reseller.

The late payment crackdown post on safeonlinebilling.com covers the wider 2025-26 regulatory context, including the cap on payment terms and the new Small Business Commissioner powers. The point on this side of the conversation is what the reseller actually does in the billing run, week to week.

How SAFE Handles It

Aged debt reports are built into the KPI screens. SAFE CRM adds a daily chase sweep, a case worklist, holds, payment arrangements and late-payment charge stages you configure yourself. It keeps a record of every assessment, and raises a separate charge invoice when an approved stage goes through.

See the credit control feature for how the worklist operates. For customers you would rather not invoice at all, auto top-up for pre-pay accounts keeps the account funded in advance, so that usage never becomes a debt to chase. A failed collection still needs someone to look at it.

For a walk-through against your own current aged debt profile and a sample letter sequence, the contact form is the way in.