Torfaen Business Voice August 2017 Newsletter

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Claiming extra for late payment of invoices It is an unfortunate truth that most businesses are owed considerable amounts of money from customers who do not pay on time and are often considerably late. Credit control can cost businesses a lot of money and there is an impact on cash flow. It is often also the case that the business does not wish to be overly hard on the customer for fear of losing the customer. However, if a customer does not pay, it is not a good customer. Where a customer has not paid and that customer is a commercial entity, then you can charge that business a fixed sum for the cost of recovering a late commercial payment on top of claiming interest from it. A payment becomes late – if you haven’t already agreed when the money will be paid – after 30 days for public authorities and business transactions, or after either the customer gets the invoice or you deliver the goods to provide the service (if this is later). You can also charge interest (known as statutory interest) if another business is late paying for goods or services. The rate is 8% plus the Bank of England base rates for business to business transactions. This is a significant interest rate when base rates are so low at present. Interest rates awarded are very low up to the point where you obtain a judgment from the court. A Judge will only allow a judgment rate of between ½ and 2%. Therefore, using the statutory framework under The Late Payment of Commercial Debt (Interest) Act 1998 to claim a fixed fee and interest means that you are at least partially compensated for the effect any late payment has on your business and cash flow. The amount you can charge in relation to the fixed sum depends on the amount of debt. For debts of up to £999, the charge is £40; for debts of £1,000 to £9999.99 is £70 and for any debt of £10,000 or more £100. Service charges in commercial leases Service charges enable landlords to recover from tenants the costs of making repairs and providing certain services. They can also provide a contingency against the cost of future expenditure. Service charges commonly arise where there is a need to maintain common or shared areas, such as shopping complexes or industrial estates. The terms of the lease will be the significant factor in determining what is covered by the service charge and the amount payable. The best protection, for landlords to ensure that it can recover costs of maintaining a site, and tenants to avoid excessive or unexpected expense, is to take care in the negotiating and drafting of the lease. Whilst residential service charges are subject to extensive legislation, which imposes statutory limitations on recovery, there is no similar protection for the commercial tenant. There is, however, some assistance from the Royal Institute of Chartered Surveyors Code of Practice for Service Charges in commercial property. Whilst it is only a code of practice, and therefore voluntary and not legally binding, the Code represents best practice for property professionals and landlords and tenants, and is a useful point of reference when negotiating service charges in a lease. Also, in the event of any dispute as to the nature and effect of those charges, it is likely that reference would be made to the Code in any court proceedings or other form of alternative dispute resolution. Key elements of the Code are that: Services should be procured on a value for money basis Landlords should not profit from their provision Management fees be reasonable The service charge be demonstrably fair and reasonable and costs be transparent Items charged should be identifiable, allocated and apportioned Certifying of accounts should be non-partisan and as experts, ensuring certified costs have been incurred and are properly recoverable under the lease Budgets have an explanatory commentary and issued at least one month before start of service charge year Statement of actual expenditure issued within four months of end of that year. 4 TORFAEN BUSINESS VOICE | AUGUST <strong>2017</strong> NEWSLETTER
New data protection laws for businesses No matter what stage of development your business is at - whether start up, expanding or comfortably ticking along - you can be sure that you will be handling information about your customers and partners. So what's this all about? The new legislation, known formally as the General Data Protection Regulations (GDPR), revokes a previous EU directive and the Data Protection Act 1998 and it comes into force fully on 25th May 2018. The GDPR sets out the rules for the processing of a person's data with a view to protecting their rights and freedoms, as well as setting the requirements for the movement of this data. The GDPR is overseen by the Information Commissioner's Office (ICO). So what are the rules? In summary, there are six principles of the GDPR. These are that personal data must be: 1. 2. 3. 4. 5. 6. Processed lawfully, fairly and in a transparent manner Collected for specified, explicit and legitimate purposes Adequate, relevant and limited to what is necessary for the purpose of processing Accurate and up to date Not kept for longer than necessary Securely kept Why does this matter? Whilst this might not seem like a big deal, these changes in the legislation that govern how businesses look after that data mean that the implications of getting it wrong are serious: you could be fined up to 4% of your turnover which could be disastrous. In addition, individuals affected by a breach of the GDPR will be able to claim damages for hurt as well as material damages. So in effect, if someone lost £1,000 due to fraud caused by your breach of the GDPR you could be fined by the ICO; made to repay the fraudulent amount (the material damage in this example) and then have a civil case taken out against you for additional damages. What do I need to do about it? There's information on the ICO website here https://ico.org.uk/- for-organisations/business/ that will help you to prepare for the change in legislation but they've also produced a paper suggesting that all organisations follow 12 steps to be ready for the new regulation. Awareness: key people in your business need to be aware of the new law. Information you hold: you'll need to clearly document your use of personal data. Communication: you'll need to update privacy notices on your contractual documents to take account of the GDPR. Individual rights: you'll need to ensure that your procedures cover all individuals' rights. Subject Access Requests: as individuals have the right to see the information you hold on them, you'll need to ensure you have a GDPR compliant way of retrieving and sharing the information for free. Legal basis: you'll need to ensure you document the legal basis on which you're processing the data. Consent: you'll need your customers to be very clear why they're giving you the information. This has to be by way of positive opt-in. Children: the GDPR is very specific about the treatment of children's data (anyone under the age of 13 in their world) so if your business deals with this data make sure you follow this closely. Data breaches: you need to have clear procedures for detecting, reporting and investigating breaches to help you avoid the fines outlined above. Data protection by design: if you introduce a new product or service think about how it'll impact on individuals' data and get it right from the start! Data Protection Officer: every business needs a designated officer. If you're a sole trader, it's you. International: if your business exports data (and if you're exporting a product or service, you likely will be) you'll need to make sure your processes and procedures cover this. All of this could be very costly but thankfully relatively easily avoided. The ICO has published guidance to help you prepare for the new legislation. And there is still time! If you want to know more, check out the ICO website. https://ico.org.uk/for-organisations/business/ TORFAEN BUSINESS VOICE | AUGUST <strong>2017</strong> NEWSLETTER 5
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