What is a reasonable payment term?

[tony84]

Most of my customers are individuals, not business. 99% B2C.

This month, I have had a few invoices with payment terms of 7 days (most will be paid within 7 days, some might have gone a little over but all long standing relationships so they know they will get paid and how I work).

But this has made me think about what we do.
The way I have always worked is that we charge our fee on full offer of a mortgage. However I do our invoicing at the end of the month. That means everyone will receive their invoice 1-25 days after the offer is issued - I explain this to customers upfront and they are fine with it. I tend to say to people to just pay within a month (ie by the time I get round to doing next months invoicing).

That means people are getting between 30-55 days payment terms.

That is fine with me, It is how I do things which dictate those timeframes. But I am just wondering if I should maybe change it to give people 7-14 days after the invoice date?
The upside here is that more people may pay without needing a nudge. Realistically, I would not be chasing people after 7-14 days, that is just creating another job I dont need or want. I would still end up chasing when I do the next lot of invoicing.

Should I change to be more in line with the rest of the world or is it a case of "if it works, dont break it"?

 

[EnterprisePro]

In my view, payment terms are somewhat influenced based on what the cash flow expectation is of the business. In particular, how much cost you're accruing each month and whether your revenue (or cash if you're cash basis rather than accrual) is offsetting your costs each month. It will also depend on your financial reserves to cover the costs each quarter or month.

If your cash-flow is not going negative, and you have enough runway to cover the costs accrued, and as a director/shareholder, your personal ROI goals about the business aren't affected, then keep as is.

 

[GLAbusiness]

In my view, the payment terms clock only starts when the invoice is issued. So, all your customers get the same payment terms (say 30 days after date of the invoice). I would recommend stating that on the invoice - e.g. payment due on or before 3rd June 2026.

If you want to improve cash flow you have two options

1. Invoice during the month rather than batch processing at month end.
2. Reduce you payment terms from 30 days to (say) 14.


If you are happy with things now then carry on as you are now, but clarify that payment terms are from date of invoice, not from completion of the deal

 

[tony84]

In my view, the payment terms clock only starts when the invoice is issued. So, all your customers get the same payment terms (say 30 days after date of the invoice). I would recommend stating that on the invoice - e.g. payment due on or before 3rd June 2026.

If you want to improve cash flow you have two options

1. Invoice during the month rather than batch processing at month end.
2. Reduce you payment terms from 30 days to (say) 14.


If you are happy with things now then carry on as you are now, but clarify that payment terms are from date of invoice, not from completion of the deal

Cashflow is fine. Its not a cashflow issue question, more just to query whether I should be doing things differently in line with seemingly everyone else.

As I was typing it out, I think I might have answered my own question.

If I give people payment terms of 7/14/21 days but then I have no intention of checking until I do the next lot of invoicing, I think I am just causing more work for myself and might as well carry on as is.

I was just doubting myself for a moment.

 

[Mark T Jones]

I suspect id doesn't apply to most of your customers, but my golden rule on invoicing is the more time that passes, the less urgent they will view it.

My wife invoices religiously each evening - 50% pay on receipt of invoice, the vast majority within a week (regardless of invoice terms)

Id strongly recommend immediate invoice and 14 day terms (just to give admin time)

 

[tony84]

I suspect id doesn't apply to most of your customers, but my golden rule on invoicing is the more time that passes, the less urgent they will view it.

My wife invoices religiously each evening - 50% pay on receipt of invoice, the vast majority within a week (regardless of invoice terms)

Id strongly recommend immediate invoice and 14 day terms (just to give admin time)

I do agree in principle.
I might change our terms to 14 days and put something in there to basically say we charge interest and a late payment fee if not paid in that time. I suppose it might help focus their mind but like I said, there is not really a problem getting paid - in 14 years I know the cases where it has been a problem, thats how rare it is.

Invoicing daily! That sounds like my idea of a nightmare haha. I hate doing it once a month. Hopefully it wont be so bad with the new system.

I could also use the line "We are cancelling your application" - I am sure that would get the result we want. (I dont think I could ever do that but its a grenade if we need one).

 

[Mark T Jones]

I do agree in principle.
I might change our terms to 14 days and put something in there to basically say we charge interest and a late payment fee if not paid in that time. I suppose it might help focus their mind but like I said, there is not really a problem getting paid - in 14 years I know the cases where it has been a problem, thats how rare it is.

Invoicing daily! That sounds like my idea of a nightmare haha. I hate doing it once a month. Hopefully it wont be so bad with the new system.

I could also use the line "We are cancelling your application" - I am sure that would get the result we want. (I dont think I could ever do that but its a grenade if we need one).

There is no real need to offer terms -'payment now due' will suffice.

I was always taught there are 2 points when the customer is positively motivated to pay:

1. When they decide they want it.
2. When it is delivered.

As soon as delivery happens, the slide in motivation is precipitous- and can turn in to objection.

I'm sure invoicing is a PITA, but it's actually the whole point of being in business

 

[MyAccountantOnline]

Most of my customers are individuals, not business. 99% B2C.

This month, I have had a few invoices with payment terms of 7 days (most will be paid within 7 days, some might have gone a little over but all long standing relationships so they know they will get paid and how I work).

But this has made me think about what we do.
The way I have always worked is that we charge our fee on full offer of a mortgage. However I do our invoicing at the end of the month. That means everyone will receive their invoice 1-25 days after the offer is issued - I explain this to customers upfront and they are fine with it. I tend to say to people to just pay within a month (ie by the time I get round to doing next months invoicing).

That means people are getting between 30-55 days payment terms.

That is fine with me, It is how I do things which dictate those timeframes. But I am just wondering if I should maybe change it to give people 7-14 days after the invoice date?
The upside here is that more people may pay without needing a nudge. Realistically, I would not be chasing people after 7-14 days, that is just creating another job I dont need or want. I would still end up chasing when I do the next lot of invoicing.

Should I change to be more in line with the rest of the world or is it a case of "if it works, dont break it"?

Why dont you charge when the work is complete ie on full offer of the mortgage and collect payment then?

 

[Ozzy]

"if it works, dont break it"

Ultimately, this is my view based on what you have said. However, if you could manage it, I would look at daily invoicing so the clock starts ticking right away, if at all possible. If that isn't viable, then it isn't broke, so it's fine.

 

[tony84]

Why dont you charge when the work is complete ie on full offer of the mortgage and collect payment then?

There are a few reasons...
There are times where I am too busy, I know most people think our job is finding the cheapest deal but that takes less than 10 minutes.

I can regularly think I have an easy day then receive a phone call or email that takes up the next 3 hours.

If I have a standard process, nothing gets missed. If I look through my emails for all the offers that month, I fire them all out. If I do them ad-hoc as and when they come and one gets missed for whatever reason, it could be months before I realise (or year end accounts).

 

[Newchodge]

There are a few reasons...
There are times where I am too busy, I know most people think our job is finding the cheapest deal but that takes less than 10 minutes.

I can regularly think I have an easy day then receive a phone call or email that takes up the next 3 hours.

If I have a standard process, nothing gets missed. If I look through my emails for all the offers that month, I fire them all out. If I do them ad-hoc as and when they come and one gets missed for whatever reason, it could be months before I realise (or year end accounts).

As has been said - if it works, don't fix it!

 

[Paul Carmen]

If you want to change and improve it (not sure you need to), the key is to automate as much of it as possible. I'm sure you have a system or process that logs the mortgage offers, even if its only a spreadsheet.

You use this to batch process invoices once or twice a week into an accounting package (Xero, QuickBooks etc), then there isn't much extra admin running it twice a week. You simply import all the details into an invoice template; e.g. customer info, billing info, amounts etc. in one day and then send them all in bulk.

You can then set generic terms with automated follow up processes. You send a soft email if it is overdue by a few days, with more strident automated email reminders that explains late fees or any other terms you have at later stages.

You can then follow up and review yourself once a month as you do now with no extra admin needed.

 

[GLAbusiness]

If you want to change and improve it (not sure you need to), the key is to automate as much of it as possible. I'm sure you have a system or process that logs the mortgage offers, even if its only a spreadsheet.

You use this to batch process invoices once or twice a week into an accounting package (Xero, QuickBooks etc), then there isn't much extra admin running it twice a week. You simply import all the details into an invoice template; e.g. customer info, billing info, amounts etc. in one day and then send them all in bulk.

You can then set generic terms with automated follow up processes. You send a soft email if it is overdue by a few days, with more strident automated email reminders that explains late fees or any other terms you have at later stages.

You can then follow up and review yourself once a month as you do now with no extra admin needed.

Sledgehammer Nut?

 

[Paul Carmen]

Sledgehammer Nut?

Quite possibly, hence why I said "not sure you need to".

However, if you're going to change, and invoicing manually is time consuming as Tony suggested, then using your existing process to automate and save you time is a no brainer.

We work with lots of companies, especially in the mortgage/finance market, and helping them automate and save time from lead gen/contact right through to invoicing allows them to scale profitably without having to significantly scale admin.

 

[HFE Signs]

It sounds like what you're doing is working, it might be better to raise your invoices every 2 weeks rather than wait until the end of the month, that's probably what I'd do.

 

[tony84]

If you want to change and improve it (not sure you need to), the key is to automate as much of it as possible. I'm sure you have a system or process that logs the mortgage offers, even if its only a spreadsheet.

You use this to batch process invoices once or twice a week into an accounting package (Xero, QuickBooks etc), then there isn't much extra admin running it twice a week. You simply import all the details into an invoice template; e.g. customer info, billing info, amounts etc. in one day and then send them all in bulk.

You can then set generic terms with automated follow up processes. You send a soft email if it is overdue by a few days, with more strident automated email reminders that explains late fees or any other terms you have at later stages.

You can then follow up and review yourself once a month as you do now with no extra admin needed.

Sledgehammer Nut?

Gotta admit, that sounds like my worst nightmare More systems, more costs, more work, more chasing. I think I would rather just not get paid.

I have been talking to a developer as we have our own back office system built. He suggested than when I change the mortgage status to "offered" it sends out an automated email with an invoice - that sounds ideal to me. Something I do anyway, does my invoicing.

I am going to change our terms to be paid within 14 days, but realistically still give people the month before chasing. If it comes in sooner, bonus. If not, I am not worse off.

 

[Paul Carmen]

Gotta admit, that sounds like my worst nightmare More systems, more costs, more work, more chasing. I think I would rather just not get paid.

I have been talking to a developer as we have our own back office system built. He suggested than when I change the mortgage status to "offered" it sends out an automated email with an invoice - that sounds ideal to me. Something I do anyway, does my invoicing.

I am going to change our terms to be paid within 14 days, but realistically still give people the month before chasing. If it comes in sooner, bonus. If not, I am not worse off.

Tony, that's literally what I was suggesting, always use your existing data/systems to automate the process if you can. Maybe I wasn't clear, I was suggesting less manual admin work, no manual chasing and more time to do the actual job!

 

[tony84]

Ah sorry. I seen xero and importing details etc and thought that sounded like more of everything.