Invoices

[DeterminedOne]

Morning all,

Quick question about invoices...when I've invoiced my customers in the past I've given them 30 day terms. To be honest the only reason I did this was because it was what was on the invoice template that I first used and as far as I'm aware 30 days is standard?

However, I have a lot of outgoings over the next few months and if I could get the money coming in a bit more quickly it could save me a lot of admin/time in terms of moving money round accounts to avoid interest payments etc..

So my question to you guys is can I use whatever term I want and if so is 14 days reasonable?

Thanks!
Laura

[Widgey]

Hi Laura:

I have got into a little bit of trouble in the past for not letting my customers have the full 30 days to pay it off!!

I was in the same situation as you, needed the money, so reduced my payment terms. Tried to take them to small claims court after a period of 40 day and was told I wasn't owed anything because I was supposed to give them 30 days and I had started asking for the money too early. Something to do with Late Payment of Commercial Debts (Interest) Act 1998.

The cheeky gits even tried to take me to court for harrasment, when I had only contacted them 3 times (1 letter, 1 phone message and then one phone conversation). But luckily all was left.

I was then advised to give them the standard 30 days with a discount if they paid it off earlier, maybe you should try this.

E.g. £5000 with a 30 day payment term or if the debt is cleared in 14 days £4600

Will be a great incentive for them to pay earlier!!

Are you able to do something like that?

Paul

[moneyman]

if you are small and you tell the customers anything is possible. check, are you 30 days or 30 days from end of month (i think that is Quickbooks default). this can add up like nobodies business and will need two months turnover at least to finance.
if you see people once a fornight then it is quite easy to do a delivery and cheque pick up at the same time.
just flag it up to the customer that it is 14 days and chase politely. for 80% of customers: they pay when asked or chased.
get them used to you phoning and they will get used to paying on time. these things can slip. dont teach your customers bad habits! oh and remember even a chase up phone call can be friendly which can also mean you can ask them if there is anything they need (sales).
plead small company, materials etc most will understand. never accept "its not our company policy to pay on xxx" i could tell you horror stories especially with supermarkets.

[DeterminedOne]

Thanks Paul / Moneyman for your advice,

I do have quite a good relationship with my clients, its just ashame they don't process invoices themselves! I can't really afford to give a discount at this point in time so I think I'll make the next invoice 14 days and see how they take it.. if there's uproar I'll have to re-assess the situation!

Laura

[Widgey]

Good luck either way!!

Paul

[openmind]

I have clearly stated on my invoices 7 days. After 7 days a 6% penalty is added. Never had any problems with people paying up

[calmdesign]

openmind - i like that tactic - i think i will start using that, but maybe allow 14days. How did you come to 6%, may i ask, and have you ever had to apply it?

Coris

[openmind]

It was just a figure I settled on.

To be honest I've not had to apply it yet as:

1 - I don't start work until the first 50% deposit is paid and
2 - I don't make the site live until the final payment has cleared

It's amazing how quick people pay, can't imagine why

The only exceptions I make are for regualar clients where I know if I send them an invoice I'm going to get paid on time...

As long as your payment terms are made crystal clear, there's no room for arguments or discussion further down the line....

Obviously this works well in my industry but doesn't work quite so well for others...

[James Smith]

I offer zero day credit. I very rarely have anyone actually try and negotiate credit terms, and again if I can don’t finally complete work until I have been paid – eg I won’t send the tax return of until the money is in my account. I also ask for money in advance close to deadlines where I know there isn’t time to wait for payment.

I often get paid straight away, and most people pay within 7-14 days, and with a gentle reminder or two I rarely get anything much over 40 days o/s.

Different industries will vary, but why automatically give credit? How often have you actively negotiated credit terms when engaging a supplier? Probably not often………so why offer it for free?

[Eagle]

My payment terms are: "no pay, no get!"

[DeterminedOne]

Some very good points raised there...why should I automatically give credit and whoever decided on the 30 days anyway!?!

Saying that I don't want to get anyones back up so I'll try the 14 days and all being well I might reduce it further!

Thanks for everyone's advice!

Laura

[seiretto]

Hi Laura,

Its your time and money that it at stake here - its one area you need to be tough.

We do not offer ANY credit, on all our invoices, where not paid, it states:
"THIS INVOICE IS PAYABLE IMMEDIATELY.
For payments later than one month from the invoice date,
we reserve the right to charge interest at a rate of 10% per month on the total outstanding."

In ten years we have made use of the 10% charge only couple of times, but this can be very useful as it pays for you time to chase such payments - I hate late payers, we pay all our bills on the day due or before.

We host several large company sites (NHS sites/Nuclear Energy sites/Other Plcs) and startups too, we expect and get payment on time from all clients. Why? Zero days credit means your invoice is dealt with first and others will x days credit go into the inbox to deal with later.

However, like Phil and others have already stated having control of the service/goods makes a difference, and this method may not suit all industries.

[hoobs]

I have some suppliers that offer 5% discount if the invoice is settled with 7 days. Works on me every time.
mike
www.sophieandgrace.co.uk
personalised and just married bikinis