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We here at Johnson Kenny Co Limited know that late payment is one of the most persistent problems facing Irish SMEs. You have delivered the goods or completed the work, issued your invoice on time and then waited weeks, or even months, to be paid. Meanwhile, your own bills, wages and tax liabilities still need to be met. Many business owners do not realise that Irish law gives them clear rights when business customers pay late, including the right to charge interest and claim compensation. Understanding and using these rights can help you get paid faster and protect your cash flow.

The Real Cost of Late Payment

Late payment does far more than cause frustration. Every overdue invoice is money your business has earned but cannot use. It can force you to rely on an overdraft, delay paying your own suppliers, postpone investment or, in the most serious cases, threaten the survival of an otherwise profitable business. Smaller businesses supplying larger customers are often hit hardest, as they may feel they lack the bargaining power to push back.

What the Law Says

Ireland’s late payment regulations, which implement EU rules, apply to commercial transactions between businesses and between businesses and public bodies. They do not apply to sales to private consumers.

Where no payment date has been agreed, payment is generally due within 30 days of the customer receiving your invoice, or receiving the goods or services if that is later. Businesses are free to agree their own payment terms, but terms longer than 60 days are only permitted where they are expressly agreed and are not grossly unfair to the supplier. Public bodies are generally required to pay within 30 days.

Your Right to Statutory Interest

If a business customer pays late, you are entitled to charge interest on the overdue amount from the day after payment was due until it is paid in full. The statutory rate is set at eight percentage points above the European Central Bank’s main refinancing rate, and is reviewed twice a year. This is a significant rate, designed to discourage customers from using their suppliers as a source of free credit.

Interest is calculated as simple interest on the amount outstanding, and you do not need to have included an interest clause in your contract to claim it, as the right exists under the law.

Fixed Compensation for Recovery Costs

In addition to interest, you are entitled to claim a fixed sum as compensation for the cost of recovering a late payment. The amount depends on the size of the debt: €40 for amounts under €1,000, €70 for amounts from €1,000 to under €10,000, and €100 for amounts of €10,000 or more. Where your actual recovery costs are higher, you may be able to claim reasonable additional costs.

These amounts may seem modest individually, but across a number of overdue invoices they add up, and simply making customers aware of them can encourage faster payment.

Contract Terms Cannot Simply Remove Your Rights

Some larger customers try to include terms in their contracts that exclude or limit late payment interest or compensation. Under the regulations, terms that exclude interest or compensation for recovery costs are presumed to be grossly unfair and may be unenforceable. This gives smaller suppliers important protection, even when they have little room to negotiate.

Putting Your Rights Into Practice

The most effective way to use the law is to make your terms clear from the outset. Include your payment terms and your right to charge statutory interest and compensation in your terms and conditions, quotes and contracts. Show the payment due date clearly on every invoice, along with a short statement that interest and compensation may be charged on late payments.

When an invoice becomes overdue, send a prompt reminder, followed by a firmer letter if payment does not arrive. A final demand that sets out the interest and compensation due often prompts payment from customers who have been prioritising other suppliers. If payment is still not received, debt collection or legal proceedings may be the next step.

Balancing Rights and Relationships

Charging interest is a right, not an obligation. Many businesses choose to use it selectively, for example with persistent late payers, while taking a more flexible approach with valued long-term customers experiencing temporary difficulties. Even where you decide not to charge interest, the fact that you could can strengthen your position in conversations about payment.

It is also worth remembering that interest and compensation received from customers form part of your business income and should be recorded correctly in your accounts.

Strong Credit Control Comes First

The law works best alongside good credit control. Check the creditworthiness of new customers, agree clear terms before starting work, invoice promptly and accurately, and monitor your debtor list regularly. Offering convenient payment methods and following up consistently can significantly reduce the number of invoices that become overdue in the first place.

Get Paid What You Are Owed

You have earned the right to be paid on time. By understanding the late payment rules, building them into your terms and applying them consistently, you can improve your cash flow and reduce the time and stress spent chasing customers.

At Johnson Kenny Co Limited, we help businesses improve credit control, manage cash flow and put the right processes in place to get paid faster.

If you would like to discuss your business, contact us on or email tkenny@Johnsonkenny.ie or visit johnsonkenny.ie.

Disclaimer: This article is based on publicly available information and is intended for general guidance only. While every effort has been made to ensure accuracy at the time of publication, details may change and errors may occur. This content does not constitute financial, legal or professional advice. Readers should seek appropriate professional guidance before making decisions. Neither the publisher nor the authors accept liability for any loss arising from reliance on this material.