Payment terms

[Gordon - Commercial Finance]

Hi all

Hopefully a quick question. If you had an invoice with 28 day payment terms, but the 28th day fell on a Sunday, would you pay the invoice on Friday (26D) or the Monday (29D).
Could paying on the Monday be considered a late payment?

Thanks

 

[Paul Norman]

Well, technically, yes. Monday would be a late payment.

However, I rather suspect that most suppliers would be very content with that!

I would tend not to be so precise about it! Most likely, I would have paid it sooner.

 

[JEREMY HAWKE]

I would be more than happy if you paid on Monday, More than happy

 

[arnydnxluk]

would you pay the invoice on Friday (26D) or the Monday (29D)

Neither, I don't pay invoices last minute - unless the payment is taken automatically by the supplier (e.g. by card, which tends to be on the due date).

The supplier is unlikely to care but given the fact you could make payment on any of the previous 28 days, what's the purpose of leaving it until the Monday?

 

[Mark T Jones]

I think for most people, 29th would constitute prompt payment

To many, 15th of the following month would be prompt enough and a significant minority when the chasing is unbearable is time to pay

Personally, when I was young and cocky I thought it was cool to hold off paying. These days I pay pretty much on receipt of invoice irrespective of terms.

 

[Gordon - Commercial Finance]

Thanks everyone.

Just clarify this wasn't prompted by an invoice I'm due to pay. I pay early!
This is money I'm due to receive.

 

[STDFR33]

I would pay on the Monday.

It must be a huge invoice we are talking about if you've started a thread about it!

 

[Gordon - Commercial Finance]

It must be a huge invoice we are talking about if you've started a thread about it!

Not huge, but certainly significant.

I started a thread about it because I was working on a forecast and couldn't find an example that would tell me when I would see the income. I could just wait until the 26th and then I will know for sure, but I don't have that kind of patience. Anyway, it awoke my curiosity so I brought it to the forum.

 

[namesweb]

Sorry to resurrect an old thread but it felt particularly relevant here;

As a small business owner I've always felt really strongly about payment terms that are offered by retailers, distributors and generally larger businesses, with some forcing 75 days to 90 days to settle up invoices.

I feel there should be a maximum cap of 30 days in law for any invoice to be settled, in order to make cash flow much easier to manage and forecast for small to medium businesses.

I'm sure a number of you who also operate your own businesses will have experienced this, and so I've created a petition on the parliament website to help gain some traction on this and hopefully have it discussed in parliament. Whilst the government and some major retailers have voluntarily brought in prompt payment policies where they aim to settle in the shortest time possible, they are very much the exception and there is nothing really to stop a 30 day cap being written into law. Nobody should need more than 30 days to pay an invoice.

Thankfully we're doing ok but a lot of businesses have to resort to invoice factoring companies and other forms of bridging finance, simply because it's sat in their customers invoice payment system to be processed a few months down the line, when it could easily be paid within 30 days.

If you could please share it with all your fellow business owners and hopefully we can support and grow our SMEs which make up the backbone of this country, especially amid the uncertainty we all face in the coming years.

https://petition.parliament.uk/petitions/215758/sponsors/new?token=VOdf9QsjeBu2kO0H

Many thanks

 

[Noah]

Interesting. We have recently started supplying a very high-end retailer with (ostensibly) loadsa dosh, and were informed their terms are end-of-month after 75 days from invoice - always amuses me when customers dictate terms. Anyway, we went ahead because initial value at risk is low and it is a customer that could be good for our image, market presence, that sort of vanity/marketing stuff. However, we have set a tight credit limit, and if business builds we will require terms to be adjusted to something more reasonable - theory is that as an established supplier we will have more leverage than at introduction, and we can certainly just walk away if not.

I am aware of the irony that a big business should have the least problem of any with paying invoices promptly, and that requiring extended terms is both taking the piss and a indicator of risk.

So in response to the petition : I am inclined to support it, but I am not convinced that legislation is actually desirable at this point. Caveat : This is from my experience in my business sector, and I can appreciate that e.g. construction may be an entirely different proposition.

On a related note :
Do you supply supermarkets? Christine Tacon wants to hear from you.

 

[Awinner2]

When I had my own business in the 70s-90s one of my regular clients was British Rail. They always paid 28th day of month following invoice for years. I then received a letter from their payments office in York saying that this method of paying was causing them logistical problems, due to the sheer volume of total invoices. Would I mind if they paid every 14 days instead? !! That took me all of 60 seconds to decide! I found over time that the best payers for me were British Rail, BBC and Harrods. Good days.

 

[Noah]

If you could please share it with all your fellow business owners and hopefully we can support and grow our SMEs which make up the backbone of this country, especially amid the uncertainty we all face in the coming years.

https://petition.parliament.uk/petitions/215758/sponsors/new?token=VOdf9QsjeBu2kO0H

Err... you need to gather your minimum 5 supporters before broadcasting this!

 

[namesweb]

Ah Ok, this definitely should be working now! Sorry

 

[Noah]

Ah Ok, this definitely should be working now! Sorry

Nope. Hope I'm not being pedantic or missing something, but the link you gave us only says "
Sign Hem Mann’s petition" without any explanation of the petition itself. If I try to see that I get this : "This petition is gathering support"

 

[Mark T Jones]

There is no detail on the petition page to make me want to go further.

Actually, I don't want to sign the petition; I do agree that big cos (particularly in retail and construction) are draconian in their terms; but I also think that small businesses need to wake up and understand the contracts they are getting themselves into.

As the world's worst factoring salesman, I lost many. many deals by trying to explain to prospects why they should read and understand contracts and how they should create and implement a coherent credit control system. At that point they would switch off and go find someone who would sell them factoring

TBH, my concern here is that small businesses are starting to see themselves as some kind of protected species, which isn't good!

 

[Caledonian TV]

Hem Mann’s petition:

Payment terms for invoices should be limited in law to a maximum of 30 days.

As a small business owner, cash flow is incredibly important to help our companies grow, however when dealing with bigger distributors, wholesalers, and retailers, they operate payment terms of as much as 75-90 days. This can be crippling to the business. This should be limited to 30 days by law.

There really is no need for anyone to take longer than 30 days to pay an invoice. As a new business you are given pro-forma invoices to pay out, when you first establish yourself you're given perhaps 30 days if you're lucky, however the reverse doesn't hold true - where you have made a sale, you are expected to give these huge distributors and retailers a 75 or 90 day window in which for them to pay. It creates a huge difficulty in cash flow which the owners have to somehow fund during growth.

I'm happy to sign this... Because even with some fairly 'draconian' credit control terms, it can be 'challenging' to extract what's due from big businesses. In many cases (Carillion being a good example) they're basically holding people to ransom.

Mark makes some very good points - but the downside of putting some fairly draconian terms in place is that some large firms just won't hire you! I know this first hand! - But had got to the stage where I felt that sort of 'blue chip business' (for want of a better expression) wasn't worth the grief!

TBH, my concern here is that small businesses are starting to see themselves as some kind of protected species, which isn't good!

I disagree slightly... The tiny proportion of businesses that are corporate giants are the ones acting as if they're a protected species. I sat watching the grilling Carillion's 'high heid yins' got and it was pretty plain they thought they could just run it into the ground and the public purse would be forced to bail them out... Likewise, they think tiny firms should pay-out to provide them with the credit that mitigates their cashflow. - So, some protection against 'entitled bully boys' would be a good thing IMHO!

 

[Mark T Jones]

@Caledonian TV

point taken - I'm certainly not suggesting that Bigcos are in any way innocent here, however I'm really not sure that legislation is the answer

There is already legislation covering late payments, which is pretty much ignored. Also, if you enforce 30 day contracts, bigcos will go out and find other ways to squeeze suppliers

 

[Caledonian TV]

...All true of course. I've had my fair share of dealings with them, don't like the culture or attitude, and basically do everything I can to avoid working for them. I do think though that they need to be forced to bear their own not-insubstantial weight and not be allowed to project their overheads onto small businesses - even if the financing is there, all that achieves is a loading on prices.

 

[NickGrogan]

I feel there should be a maximum cap of 30 days in law for any invoice to be settled

Any legal maximum soon becomes a minimum, see University fees.

Certainly wouldn't sign, I have clients that pay me on 7/10/14 days and have no interest in seeing them increase to 30 days.

On the other side, it takes away a commercial advantage of being able to offer 45 - 120 days to pay where it's beneficial.

Companies are able to negotiate whatever payment terms they want, many don't try.

 

[DontAsk]

Any legal maximum soon becomes a minimum, see University fees..

I don't see any Universities charging more than the maximum.

 

[NickGrogan]

I don't see any Universities charging more than the maximum.

Do you see any charging less than the maximum?

Hence the maximum has become the minimum.

 

[Jessica A.]

Yes, Monday would be already be considered a late payment. In the event that the date falls on a weekend or a holiday, it's always best to ensure payment on a Friday before the weekend or the business day before the holiday. That's what my previous company always does when the dates of our payday falls on a weekend or holiday.