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Put the interest in every chaser, from the first

Late payment usually carries interest under your subcontract or the law, and claiming it from the first chaser makes paying you late cost something. It changes your main contractor's sums on whom to pay last.

Updated: . By Jack Butler-Kettle, Construction Claims Consultant.

If you are not sure interest applies to your contract, see whether you can charge interest when your main contractor pays late.

Why it matters

A main contractor deciding whom to pay last does the sums. If paying you late costs nothing, you are the cheapest to put off, and you will be. Most unpaid subcontractors never claim interest. They either do not know the rate or worry that asking will sour the relationship. So late payment is free for your main contractor and funded by you. State the rate in the first chaser, and the delay has a price.

How to do it

  1. Find the interest clause in the contract and note the rate and how it is worked out. If the contract is silent, ask your adviser what the law provides.
  2. Put the rate on the tracker beside every overdue payment, and work out the interest to date each week.
  3. State the interest running, with the rate, in every chaser from the first.
  4. Include the interest as its own line in the next application and in the final account.
  5. Keep the calculation in the job file so it can be checked.

Example

Illustrative example. The scenario and figures are invented.

The facts

A subcontractor is owed £50,000 on its fifth payment, certified and unpaid 60 days after the final date for payment. The contract sets interest on late payment at a stated yearly rate. The subcontractor has never claimed interest on any job before.

What happens

  1. The QS finds the interest clause, works out the interest to date at roughly £700, and puts it on the tracker.
  2. The next chaser states the £50,000, the rate, the interest to date and that it keeps running daily.
  3. The main contractor's accounts team, seeing a figure that grows each week, moves the payment up its run.
  4. The £50,000 is paid within a fortnight, and the interest goes into the seventh application.

The outcome

The sum is paid and the interest recovered, not written off. On the next late payment, the main contractor pays before the chaser arrives.

To have this done for you, see our Late Payment Claim service.