Payment Terms - Rod for own back.

[dragonfly]

I'm seeing more and more customers saying thing like "We Pay 30 Days from end of month" when we are chasing payment. This is despite our terms been 30days and people agreeing to this when they accept our T&C. I'm guessing they are feeling the squeeze and trying to push some of it down the line. They are politely remind of their payment terms and asked when we will be receiving payment.

This month I have also heard from a couple of customers that one of my competitors has gone through his list of ex-customers claiming late payment charge (He won't be winning those customers back now )

Put these 2 things together and I wonder if the the customers realise the implications of what they are doing. We invoice weekly, but several of our customers pay us once a month (Can't blame them really), however if I was winding up, or retiring or anything. I could boost my pension by claiming all these late payment charges, even if I just tackle the ones that are currently trying it on. £40 per hit, 4 invoices an month, 10 or so customers, thats £1600 pounds a month, and I believe you can go back 6 years that's - just over 100k. Now you'd have to be either loosing the plot, or going out with a bang to try it. But it makes you wonder if these customers that are trying it on, know just what they could be letting themselves in for??


And before anybody points out it's a sure fire way of losing your customers, I know all that, I'm not suggesting doing it, just idly pondering after a couple of glasses of riesling.

 

[Page]

There can be a lot to be said for getting your customers paying on time and seeing how they respond to late payment charges especially in the current market.

Lets you know which ones you need to dump before it is to late! Get them over to the competition to help bring them down!

Can't pay - so don't pay - and then never pay.

 

[MartCactus]

Put these 2 things together and I wonder if the the customers realise the implications of what they are doing. We invoice weekly, but several of our customers pay us once a month (Can't blame them really), however if I was winding up, or retiring or anything. I could boost my pension by claiming all these late payment charges, even if I just tackle the ones that are currently trying it on. £40 per hit, 4 invoices an month, 10 or so customers, thats £1600 pounds a month, and I believe you can go back 6 years that's - just over 100k. Now you'd have to be either loosing the plot, or going out with a bang to try it. But it makes you wonder if these customers that are trying it on, know just what they could be letting themselves in for??

I'm not so sure a court would uphold such a claim. Surely by continuing to accept late payments from them (and continuing to accept new work from them) you are impliedly waiving the late payment charge?

 

[serendipitybusiness]

If the customer knows the law a company would never get away with charging £40 as it is an unfair penalty charge under EU law and they could fight it or take them to court to claim it back as has been happening with the banks. It has to reflect their costs.

Paying weekly is also quite inconvenient for any business excess paperwork etc, so I don't blame them for paying monthly. I am sure most busy businesses will, I would offer this as a service if I could.

However, it is also quite standard to put payable within 30 days at the bottom of the invoice. Also an interruption of service letter will also get them to put you back at the top of the 'list to pay' if they use you regularly.

 

[deniser]

I'm not so sure a court would uphold such a claim. Surely by continuing to accept late payments from them (and continuing to accept new work from them) you are impliedly waiving the late payment charge?

I agree.

To make it absolutely clear, why don't you put on the invoice - "this invoice is payable by [date] and if not paid by this date then interest will automatically accrue at the rate of [ ] on the outstanding amount"

 

[MH1]

You will see a lot more people trying this on, too help their cash flow.

I used to spend best part of a week chasing clients up for payment on accounts when running a large wholesalers in the past, i always started talking to them two days before the end of the month, made no bones about the reason for the call, needed to know payment was on the way to allow further orders to be sent on account.

I always slapped a stop on anyone who lied, would remove it once paid, but let them know if they lied again they would lose their account.

This was during the last bad recession and I was heavily penalised for bad debt against my figures for the calculation of my bonuses, every pound lost cost me three pounds of my bonus, so I worked ahrd on it. Even during the worst year of the recession I only lost £76 for the whole year, on a multi million pound turnover.

 

[jamesy1234]

The late payment of commercial debt act 2002

This is EU law, and there is a reason for this law. It is to stop companies going to the wall and people losing their jobs, caused by late payments.

I'am certainly in favour of this, and have issued numerous demands under this legalisation.

As businesses we are charged late payment by the government for our late payment and filing of our taxes, company accounts and VAT. Surely the same should apply to those businesses causing us to pay late. ????

Late payment is serious business.

I would disagree that accepting late payment is waiving any right. If a customer chooses to pay outside the agreed credit terms, it is not the supplier who is at fault.

 

[maxine]

I am also in favour of levying late payment fees and interest under this act. However, I am not sure that you can use this as some sort of savings scheme whereby you could in theory charge your debtors late payment fees retrospectively after the bills have been paid. Interesting thought though

On a more serious note it seems the conflict that you have is your terms are 30 days from invoice date whereas your supplier is paying you 30 days from end of month so an invoice raised on 1st June won't become due for payment on their systems until the end of July. This depends on whose terms of business are valid in the contract as to who is right or wrong which depends on how the terms were communicated when you offered to work for them and they accepted that offer probably on condition of their own terms.

You could put your prices up to take account of this extended time to pay that way you are not showing this as negatively as a late payment fee.

I would also suggest that you do start charging late payment fees and interest as it's only when people start to start seeing the extra cost of these that they take any notice.

Good luck

 

[KM-Tiger]

You will see a lot more people trying this on, too help their cash flow.

It's not necessarily a try on, it depends what is the norm for the industry sector. When I was in manufacturing we paid end of month following, and most of our suppliers were grateful for that, and thought we were good payers, compared to their construction industry customers who thought end of second or third month following was good.

Frankly, a supplier who carped about end of month following would have been quietly dropped from the suppliers list.

 

[jamesy1234]

Using this legalisation is in no-way trying it on.

As I said there is a reason for this legalisation. Businesses paying late cause problems and costs to others. For example having to increase overdrafts, having to have more credit control etc, etc increased costs !!! Who should pay for these costs ??? I point again to the example set by government who fine us for paying late or filing late our taxes.

On payment terms, it all depends on what terms were agreed at the start of the business relationship. Accepting late payment does not mean that a supplier is accepting the customer's payment terms. If there is a dispute on the payment terms then the act allows for a 30 day default to apply.

On charging 6 years late payment charges this is the law.

To date I have received numerous settlements from previous customers back 6 years. Basically, I got fed up with the hassel of being paid late and the costs this had on my business.

And I still trade successfully. Things are certainly better without the late payers

 

[profitxchange]

It seems once again you have relied on your customers reading and accepting your T&C's. In reality that does not happen. One of the best ways of getting paid on your terms is to agree them face to face or over the phone with someone who has the authority to accept them. Then you at least a human in the contractual chain that has accepted your terms. This can be a particular problem in big organisations where the payers have a different agenda from the buyers.

 

[Lime One]

The late payment charges are stautory and therefore are charged and chargeable after the debt is owed over 30 days where this law applies. The posting is really about credit control, better to reduce the terms of credit to 21 or 14 and then start chasing rather than rely on late payment charges and interest. The work involved in chasing these sorts of amounts outweighs the benefits on numerous invoices.

Make it easier for the client to remember the bill by chasing over due debts and also very easy for them to pay ie a range of payment options. The time to educate clients on payments is at the strart of the relationship, it is much harder to do so as they get used to a more relaxed system.

 

[jamesy1234]

I wonder how many businesses in this current economic situation are being affected by late payments ???

I m certainly tighting up on credit control. 30 days please or better still payment before your order leaves.

You know what ? it works !

Dont be shy in asking for what is due.

 

[Macaodha2009]

There can be a lot to be said for getting your customers paying on time and seeing how they respond to late payment charges especially in the current market.

Lets you know which ones you need to dump before it is to late! Get them over to the competition to help bring them down!

Can't pay - so don't pay - and then never pay.

Yes, that's what we should do.