The compensation fee - An often forgotten fee with a big impact

The compensation fee - you may have heard of it, but have you remembered to use it? It's a fee that many companies still overlook, even though it has been an option for years. In this article, we'll shed some light on the compensation fee and give you the tips you need to implement it correctly in your business.

In 2013, it became possible for Danish (and European) companies to impose a new fee when their business customers did not pay on time. This fee, called the compensation fee, is still an important option for many companies, yet many still forget to use it.
Before the compensation fee, reminder fees, interest and collection costs could be applied. However, the introduction of the compensation fee opened up an additional option that many small and medium-sized businesses have unfortunately not taken advantage of.

Although more and more businesses are becoming aware of the fee, it's still something many forget. It's important to remember that the compensation fee is a legal option that can help your business cover the extra costs that come with late payments.

What is a compensation fee?

The compensation fee is a fee that you as a business can charge your business customers when they don't pay on time.

The purpose of the fee is to compensate for the extra time and costs associated with reminders, following up on missing payments and managing these processes.

The fee is a maximum of 40 euros - equivalent to 310 Danish kroner. You can choose to charge a lower amount, but not a higher one. However, we recommend charging the €10 as this is the maximum amount set by law.

The compensation fee became possible on March 1, 2013, when the Danish Interest Act was amended to adapt to the EU Directive 2011/7/EU, which deals with combating late payment in commercial transactions.

When can the fee be applied?

The compensation fee is a B2B fee, which means you can only impose the fee on other businesses - not private individuals.

The fee can be applied in the reminder phase or in the collection phase and is not dependent on whether you also charge other fees or interest. So you can apply the compensation fee before, during or after you have applied a reminder fee or in connection with a reminder letter.

An important detail that many people forget: The compensation fee can be applied to every single unpaid invoice that a debtor may have - not just one invoice that was previously in doubt. This means that if a customer has, for example, three overdue invoices, you can legally charge a compensation fee for each of them.

If you don't impose the compensation fee in the reminder phase, you can still do so in the collection process if you choose to proceed with debt collection. Remember to inform your debt collection agency or lawyer that you have imposed both the reminder fee and the compensation fee when you open a debt collection case.

Why use the compensation fee?

It's a good idea to take advantage of the statutory options available to impose fees and interest when dealing with late payments.

While it's up to each company how they choose to charge reminder fees and interest (remember to limit the number of reminder letters to 3), it's a sensible strategy to include the compensation fee in your reminder policy.

Late payments mean extra costs for your business, so why not use the legal options to cover these costs? The compensation fee is a simple and effective way to cover some of the administrative costs that come with missing payments.

So remember to use the compensation fee and make sure your business gets the compensation it is entitled to when customers pay late.