Have you ever decided to call a client with an overdue invoice and ask why it hasn’t been paid?
You’ll often hear their reasons and then ask for a payment date. They, in turn, reply with a date a few days later than when the invoice is due (that’s even if you get a payment date).
The decision to accept this payment date is always up to you but...
Could you be setting a precedent?
It really does depend on your client and how well you know them.
Invoice payment terms are pre-approved conditions between a business and their client that details how the business will be paid. These payment terms could include:
accepted forms of payment
when you will pay by e.g. 14 days after invoices are issued
late payment penalties – will you charge for this?
For some clients, they genuinely have forgotten the due date was coming up. Or perhaps they were having some cash flow issues and have come back to you with a payment plan. They might even have set dates where they sort out their accounts and make payment runs.
These are all ok if they have been communicated or agreed upon with a supplier first. In fact, it shows a healthy customer relationship.
However, there will be some clients who might regularly be paying late or not paying at all. Oftentimes, there’s no valid reason behind this.
Your client could see an opportunity to constantly start paying late. You might be thinking, that’s ok, as long as it’s coming in. But as we know from experience, this can easily snowball into multiple unpaid invoices, followed by the clients stopping communications altogether (yes, we’ve had this happened before).
Sean Feast FCICM says it best:
“Certainty of payment is key, for it is that certainty that helps you plan”.
Keeping clients to payment terms helps with cash flow which in turn affects the day-to-day running of your business as well as growth.
Sometimes even after discussing this with clients before the start of a project, there will be some who still won’t follow the terms. So, what do you do?
The next steps from here will be working through your credit control process to try and retrieve what’s owed.
If you would like us to have a look at your processes, drop us an email at info@ctccsolutions.co.uk. We’d love to hear from you.
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