What Are Invoice Payment Terms?

What Are Invoice Payment Terms?

If you are a self-employed individual, a freelancer or even a small business owner, it is extremely vital that all invoices sent to customers are paid on time.

When goods or services have been provided to a customer, it is only natural that they should return the favour and pay you.

It can be detrimental to your cash flow if this does not happen and will in-turn damage the sustainability of the business.

Recent reports provided by the “BACS Payment Schemes Limited” discovered that around 34% of all UK SME business owners struggled with monthly obligations; as a result of late payment.

There are various ways to negate the probability of not being paid, however, one of the best ways to do this is by implementing beneficial procedures within your Credit Control Team, such as Invoice Payment Terms.

Our award-winning team of Debt Collection experts have put together this article to provide informative details on why invoice payment terms are used and what to do if they are missed by the customer.

What Are Invoice Payment Terms?

Most Credit Control Teams within businesses will have a particular process when it comes to the distribution and creation of invoices.

As part of this process, it is common practice to incorporate an invoice Payment Terms section as part of the customer’s invoice.

Payment Terms are set out at the start of a project or amount of works and are discussed with both the customer and the business.

The aim of the Invoice Payment Terms discussion is to agree on the date in which the services will be paid for, how much and if there are any caveats as a result of non-payment.

The relationship with the particular customer will determine how long the payment due date is from that of the works being completed.

For new customers, these will most likely be required to pay you within 30 days or 60 days. However, these can stretch as far as 90 days from the invoice date.

It is important to remember that you will most likely never see a customer who is set to 90 days invoice payment terms not paying you.

The invoice payment terms are commonly signed by both parties, and if not both, then always the customer.

When this is signed and then applied to the invoice, this is used to eradicate the potential for any confusion as to when the invoice due date has passed.

These processes are designed to minimise headaches throughout your Credit Control system and ensure good tactics are in place throughout to maximise payments. This should also help you get paid faster.

What Should You Do If Invoice Payment Dates Are Missed?

Should a payment date be missed, it is important that you know what to do in order to make the customer aware and how to get your money rightfully paid to you.

After all, the reason for having Invoice Payment Terms is to minimise the number of days in which customers may not pay on time or at all.

It is an unfortunate reality that customers still do not pay for whatever reason, but the most important thing at the end of the day is that you get paid.

1.      Chase the Customer as soon as It Is Clear Payment Has Been Missed

It is recommended that if you have a Sales Ledger system, that you check this as frequently as possible to know when payment dates are due.

If you come across a customer that has missed payment after a few days of the invoice being due, it is vital that you leave to chase them immediately.

It is important to ensure you are chatting to the person who is actually responsible for paying, as this may prolong the payment if not.

Contacting the customer by phone is the best and most impactful way to do this, as emails can be easily ignored.

In the early stages of the late payment, you should remember to keep a professional and polite as possible as there may be a genuine reason for this that can be solved amicably.

When it comes to the late payment, these are the most common excuses:

• Invoice disputes (wrong addresses/values/names etc).
• Customer financial difficulties meaning they can’t pay.
• The customer had no intentions of playing in the first place.

We have heard many reasons as to why customers have not paid on time, and one of these is due to the payment facilities provided by the business.

Adopting a modern payment system in the ever-changing world of technology is a positive step to getting paid quickly. It can also help customers pay in faster, easier ways.

Credit cards and online payments are the fastest way of getting paid, so implementing these payment options into your invoices may help in the long run.

Speaking to the customer directly should give you peace of mind, as finding out why they have not paid can allow you to plan further actions from there.

2.      Discuss Payment Methods

If you have successfully communicated with the client and have found out the reasons for the late payment, this may be time to discuss other options so that you are paid soon.

Other payment options may come in the form of, for example, a “Part-Payment”.

Continually pushing for the full payment may cause tension between yourself and the customer, so offering a part-payment proposal may help in keeping your relationship with them.

A Part-Payment will be beneficial to both parties, as you will have money entering your bank account and your customer will have started to pay their debts regardless of whether it is the full amount or not.

This option will also indicate whether or not the customer ever had any intentions to pay or not.

3.      Instruct A Private Debt Collection Agency to Recover the Payment

Have you tried both of the steps above and there have been no signs of payment? If so, it is time to get in contact with a professional Private Debt Collection Agency such as Frontline Collections.

It is never a nice situation to have to deviate from your in-house Credit Control Teams, but if invoice payment terms have been ignored, this is the next natural step.

If you have a debt that is unpaid, depending on the size of your business, your cash flow will improve if you instruct a specialist Debt Collection Agency.

Over our long history of collecting debts, we have helped a large number of clients who have felt hesitant to contact us as they feel this may jeopardise the relationship with their customer.

It is worth noting that this is not the case, as if your customer has not paid you, or is showing no intentions of paying, they have already broken the trust of your relationship.

However, one of our key mission statements is to remain sensitive to any existing business relationships to ensure the future business can continue if possible.

There are multiple other benefits to using us, such as:

• 90% Recovery Rate on Undisputed Debts
• UK’s Lowest Commission Rates Starting From 8%
• Local, National & International Coverage
• Cost-Effective, Professional and Pro-active
• No Collection – No Collection Cost to Pay!
• Strategically Located Collections Offices
• “Gold Preferred Supplier” With the Independent Schools Association

We are experts in the acquisition of Private Debts, providing our services to a large number of sectors since 2005.

These sectors have included, but are not limited to, Veterinary Practices, Independent Schools, Dental Practices and Nurseries.

It is only right that if you have carried out a service for a customer that has ignored invoice payment terms, you are paid on time.

If you are suffering from customers that have not paid, it pays to get in contact with our expert team.

Contact our New Business team today on 0333 043 4425.