Invoicing/Getting Paid for first time

[bananapringle]

Hey all,

So last month I incorporated my first company and have been working on a project which is almost coming to a close. I need to send the client an invoice so they can pay me and asked them to do so once I have got my affairs in order.

I got my business bank account set up, incorporated the company, and just registered for corporation tax. So now I'm wondering how do I go about getting paid from the client the right way? Do they send the money to the business bank account on invoice and then I set myself as an employer to take it out?

Thanks

 

[Scalloway]

Your client will pay the money to your business bank account. How you take that money out depends on various factors.

Have you spent money on behalf of the company?
Do you have other sources of income?

 

[Mark T Jones]

The big assumption here is that they will pay your invoice on receipt

They might do, or they might put you off. You need to b3 prepared for delayed or non payment

Be certain that you4 invoice makes it easy/ obvious how to pay and leave#. O room for dispute

 

[Getaway2018]

State clearly by when they need to have paid and what happens if there is delayed or non-payment. You could send an invoice with the small print and your business account details.

 

[Bob Morgan]

The Payment Procedure should be part of your Agreement/Contract with your Client – It should also be ‘Rehearsed,’ as in many instances with larger companies, the ‘Paying Client’ might be remote from the ‘Commissioning Client.’ This should always be part of your due diligence; which will also take account of ‘Client Payment Cycles’ – Also be prepared to ‘Progress Chase’ all Invoices that you issue. Clients also need to be ‘Disciplined!’ – For instance, 30 Day Payment Terms does NOT mean that they wait 30 Days before dealing with the Payment! If VAT Registered, 'Payment' can become critical, dependent upon the VAT Scheme you are using.

 

[Hahnbeck]

Contact the client now to discuss this. It's better to agree payment terms now, rather than finding out later that they pay on 90 day terms.

Regarding how to take money out yourself, yes your client should pay your business bank account, and then you can pay yourself as an employee of the company through the payroll (bearing in mind you will pay no income tax on any income you earn up to the personal allowance, which in most cases £11,850 - this includes all of your income sources not just this company). You can also take the money as a dividend but this would be unusual for a very new company, unless you have a specific reason to do so. Speak to your accountant about this.

 

[estwig]

Contact the client now to discuss this. It's better to agree payment terms now, rather than finding out later that they pay on 90 day terms.
R/QUOTE]

Don't discuss with the client when they are going to pay you.

Tell them when they have to pay you, it's not their choice, it's yours!

 

[Newchodge]

Contact the client now to discuss this. It's better to agree payment terms now, rather than finding out later that they pay on 90 day terms.

Regarding how to take money out yourself, yes your client should pay your business bank account, and then you can pay yourself as an employee of the company through the payroll (bearing in mind you will pay no income tax on any income you earn up to the personal allowance, which in most cases £11,850 - this includes all of your income sources not just this company). You can also take the money as a dividend but this would be unusual for a very new company, unless you have a specific reason to do so. Speak to your accountant about this.

You really ought to talk to an accountant about this.

Payroll - you will need to use some kind of payroll software if you are going to pay yourself more than £116 per week or the equivalent in a month.

While your annual tax free amount is probably £11,850 that is an annual amount, which is divided evenly through the year @ £987.50 per month. As you haven't paid yourself anything in April, you can take £1,975 in May, free of personal income tax, provided you have no other PAYE income since 6 April 2018.

However, the money in the limited company is not all yours. The company will have to pay 19% corporation tax on its profits - that is total income less allowable expenses.

An accountant can discuss with you whether it is better to take all the money you are entitoled to through payroll, or shether it is better to take a mix of payroll and dividends etc.

 

[Gecko001]

I would send them an invoice which has all the information that is required to be on an invoice and let them get on with it. See the following link for what information you need to put on an invoice:

https://www.gov.uk/invoicing-and-taking-payment-from-customers/invoices-what-they-must-include

It is common to put payment terms on the invoice as well. 28 or 30 days from date of invoice is common with B2B payment terms. If you have not agreed payment terms before you took on the work, then putting them on the invoice is highly recommended.

 

[deanpunchard]

You really ought to talk to an accountant about this.

Absolutely! Even if it's just a consultation to make sure everything is in line and OK. You really don't want to get into trouble with HMRC.
Being an incropotated company means you have to follow the same rules that multi national businesses follow, there are no short cuts. I'm not daft, I have an A-Level in maths and business studies, but would never attempt to do the end of year accounts. Speak to a reputable accountant, someone who deals with small businesses, and hear what they have to say.

Dean

 

[Hahnbeck]

"Don't discuss with the client when they are going to pay you.
Tell them when they have to pay you, it's not their choice, it's yours!"

It would be great if business always worked like that. In reality it depends on the situation. Try dictating terms to Tesco.
The OP said the work has already commenced (in fact it is nearly finished), so he or she is in a difficult position to dictate terms, even if the customer is small.
But I agree, definitely going forward with all new small clients, lay out your payment terms in advance and get their agreement before commencing work (big clients will simply tell you their payment terms, which you can take or leave, with some exceptions of course).