Credit Charges (Late Payments)

This Sales code records income the business earns from credit charges (late payments). As an income account, it normally carries a credit balance: credit entries increase the balance (recording new income) and debit entries decrease it (for example, a credit note issued to a customer).

Real-world examples

B2B wholesale and manufacturing (statutory interest and compensation)

Under the Late Payment of Commercial Debts (Interest) Act 1998, a business can charge statutory interest plus a fixed compensation fee (£40 to £100, depending on the debt size) on a commercial invoice paid late. A wholesaler charging a persistently late-paying trade customer £40 fixed compensation plus £18 accrued interest posts a debit of £58 to 1100 (Debtors Control Account) and a credit of £58 to 4400 (Credit Charges (Late Payments)) — no VAT applies, since statutory late payment charges are compensation for a loss rather than consideration for a supply, so nothing is posted to 2200.

Freelance and creative services (rarely enforced)

A freelancer or small agency is legally entitled to the same statutory charges but rarely applies them in practice — chasing a small, recurring client for compensation on top of a late invoice risks the relationship more than it's worth. Where it is applied, say a flat £40 compensation fee on a very overdue invoice, the entry is identical in form: a debit of £40 to 1100 and a credit of £40 to 4400, with no VAT. In practice this code sits unused in the chart of accounts far more often than it's actually posted to, outside larger contract-driven B2B relationships.

Commonly confused with

Because code 4200 (Sales of Assets) sits right next to this one in Sales, it's a common mis-posting target. Code 4400 is specifically for credit charges (late payments), while 4200 covers sales of assets — similar in nature, but keeping them separate is what makes the sales section of your management accounts meaningful rather than a single lumped total.

What a mis-posting here costs you

A sale posted to the wrong Sales code won't change total turnover, but it will distort the sales analysis used to see which products, services or channels are actually driving revenue.

Other codes in Sales