Customer Agreeing Payment Terms

[ChopStuey88]

Hello,

Our business as it expands is being more and more effected by customers not paying in a timely manner.

Agreeing Payment Terms

When we issue an invoice we set the 'due date' two weeks from the date the invoice was generated and issued. Our terms on the bottom of the invoice state if invoice is not paid then interest may be added (no specific % etc).

Looking into the legal side of things it implies the customer can be charged the '8% over the Bank of England base rate' if they do not pay on time by the AGREED payment terms.

Now from what I can gather we do not have any 'agreement' as such regarding payment terms with our customers, we simply issue them an invoice and expect payment within 14 days. Technically they haven't really 'agreed' this or been told in advance?

Where do we legally stand here? If you don't agree your payment terms in writing with the customer does it automatically revert to 30 days?


Posting Invoices

Obviously post takes a couple days at least to arrive - can the customer argue this shortens the length of the payment term? For example 14 days would be 12 days by the time the invoice arrives...


Thanks!

 

[Socio South West]

Can you be more specific about the value of the invoices concerned here?

Also... is the level of repeat customer high? Is this a regular repeat service that gives you some hold over late payers?

 

[ChopStuey88]

Can you be more specific about the value of the invoices concerned here?

Also... is the level of repeat customer high? Is this a regular repeat service that gives you some hold over late payers?

So lets say the average invoice is around £100 mark. Yes the level of repeat customer is high with regular repeat service.

I am also getting confused with the legal side of things that complies to invoicing business and the public - apparently the rules are different for each?!

Note our customers are public

 

[Newchodge]

No one can be bound by a contract that they did not lnow about. However they can be bound by the law states that interst is payable when an invoice is late. Have a look here and on the following page. https://www.gov.uk/late-commercial-payments-interest-debt-recovery

 

[ChopStuey88]

No one can be bound by a contract that they did not lnow about. However they can be bound by the law states that interst is payable when an invoice is late. Have a look here and on the following page. https://www.gov.uk/late-commercial-payments-interest-debt-recovery

Thanks. So what we are saying in simple terms is we technically should be making our invoices due within 30 days if we don't have any formal agreement in place regarding the payment terms? Even if they do not pay within the 14 days legally we would have to wait until 30 days anyway?

 

[Newchodge]

Thanks. So what we are saying in simple terms is we technically should be making our invoices due within 30 days if we don't have any formal agreement in place regarding the payment terms? Even if they do not pay within the 14 days legally we would have to wait until 30 days anyway?

Effectively, yes, or make sure the customer sees yuour payment terms before they place an order.

 

[fisicx]

Effectively, yes, or make sure the customer sees yuour payment terms before they place an order.

That’s the best way to do things. Make sure they agree to the terms before placing the order. They then can’t complain they didn’t know.

 

[ChopStuey88]

Great thanks for your help! Regarding the question about posting invoices - where does the customer stand given post takes a few days to arrive?

 

[Newchodge]

Great thanks for your help! Regarding the question about posting invoices - where does the customer stand given post takes a few days to arrive?

Send them by email?

 

[ChopStuey88]

Send them by email?

Unfortunately some elderly customers do not have email

 

[Socio South West]

A device we used with trade customers was to invoice them at full retail price, but give a prompt settlement discount equivalent to the trade discount.

Never had to send a late payment letter once that was in place!

For these relatively small and regular amounts have you considered getting your customers to go onto a Direct Debit arrangement? (ie the amount is debited direct from their bank account either a number of days after tbe invoice date, or for monthly customers a certain day of the month?

<EDIT.... Just seen your post about elderly customers - DD probably wont be a starter for them - you are presumably B2C not B2B? >

 

[IanSuth]

I was in recruitment

All our special rate agreements said "this preferential rate is subject to strict payment within terms of x days, failure to do so will mean the fee reverts to standard ((as attached)and could mean an invoice for the extra fee being raised plus would invalidate your rebate guarantee as per section x par y of terms"

That worked well at focusing their minds on payment, if it was 14 days we would call accounts on day 13 saying "you do realise invoice 12345 is due tomorrow and failure to pay should mean an extra invoice or £x, is it being processed?"

On the 2 occasions we got to court it also allowed us to claim for the full fee amount not the discounted fee (we put in the clause after not being able to do that in a case in the mid 90's)

 

[IanSuth]

Unfortunately some elderly customers do not have email

If they are elderly they may count as vulnerable and you have to take that into account.

Be aware if you are not sending first class letters to me can take up to a week to arrive (i tend to get 2 2nd class deliveries a week with a big bundle each time)

 

[Newchodge]

If your customers are consumers and not businesses I don't think you can charge interest.

 

[MikeJ]

Your payment terms should be part of your standard terms and conditions, sent with any quote.

 

[ChopStuey88]

If your customers are consumers and not businesses I don't think you can charge interest.

Now this has confused me completely

So the public are exempt from paying invoices on time and are not liable for interest?

 

[Newchodge]

Now this has confused me completely

So the public are exempt from paying invoices on time and are not liable for interest?

I know you can get interest if they fail to pay and you sue them for non-payment, but I don't think it can be added automatically without a court order?

 

[ChopStuey88]

Thanks @Newchodge for helping out.

Can anyone clarify this is actually the case? Does this mean when serving the public invoices the payment terms are not actually enforceable by adding interest etc? The only option is court action?

 

[fisicx]

Why are you handing over goods or providing services without payment?

At least get a deposit and/or milestone payments and payment before delivery.

B2B is different but B2C should always be payment up front.

 

[Paul Kelly ICHYB]

What are you using to raise the invoice?

Even a cheap accounts package should let you email and/or print/post.

They should also have a chasing/credit control system - reminders sent out before and after money is due.

BTW, if public, why not collect funds at time of sale?