What is a compensation clause?
A compensation clause allows you, as a supplier, to ask for an extra amount on top of the standard invoice amount and in addition to interest on arrears if your client is not paying on time. Such compensation clause can be a percentage (for example, 1% per month), a fixed amount (for example, € 75 per invoice), a variable amount (for example, 10% of the invoice value), or a combination of the foregoing.
Such compensation clause is recorded in your General Terms and Conditions and/or your invoicing conditions. It is very important to include these in your invoice or to at least refer to these conditions (if you don’t have General Terms and Conditions, you can find more information here with regard to the preparation of these conditions).
This compensation clause therefore is an amount your client has to pay additionally in case your invoices are not being paid. Such compensation clause also enables you to cover possible costs for collecting your invoices. In case of Unpaid, a compensation clause of maximum 10% finances our expenses. This ensures for you to, after we have arranged the payment on your behalf, still receive 100% of the initial invoice amount. And more than that: you also recover the VAT (21%) of the compensation clause.
Thanks to the combination of one of the above possibilities or by determining an unreasonably high amount or interest, the compensation clause could quickly rise. However, there’s a maximum. In the IOS procedure (link to explanation IOS), the compensation clause combined with the possible interest on arrears should never amount more than 10% of the amount claimed.