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Latest News The importance of getting the right invoice payment terms

The importance of getting the right invoice payment terms

Invoices terms - How to get paid on time.

What are invoice terms?

Invoice payment terms tell clients when and how you expect to be paid. The timescale for payments varies due to several different factors, including the industry you work in, the kind or scale of the work being carried out and your own business terms and conditions.

How long should your payments terms be?

The most common payment term in the UK is 30 days. This means that the invoice must be paid within 30 days of the client accepting the invoice. Some large businesses do operate on longer terms – such as 60 or 90 day payments – but these are becoming rarer. In fact, the trend is moving towards shorter invoices, with up to 75% of businesses asking for payment within two weeks!

Short terms = faster payments

It’s good practice to set the shortest possible payment term, but be realistic. Think about when you ideally need the invoice paid – is it really in 30 days’ time? Probably not, because you’ll have clients who make overdue payments, making your average payment time longer than 30 days. So, if you want to be paid within 30 days, a 14 day payment term will help ensure this happens. Be aware that short payment terms are more likely to lead to overdue payments. But, the payment will still be made quicker than if your invoice had longer payment terms in the first place.

However long you give your clients to pay, the payment term doesn’t start until the invoice is in their hands. Make sure you don’t delay on getting those invoices out!

Top tips to help your invoices get paid faster

  1. Discuss payment terms before the work begins

Making sure your client knows what you expect from them from the start will prevent confusion further down the track. It also details your payment expectations from the offset.

  1. Keep thorough records – and don’t scrimp on the details!

Regularly update your records so the most up to date numbers are there when you need them – you’ll be less likely to miss something this way. It will help you keep on track of the budget, giving you plenty of time to let your client know what’s happening, rather than sending them a costly surprise at the end of the month!

  1. Ensure your invoice is simple and straightforward.

The last thing you want is for a delayed payment due to a complicated invoice. Be specific about the time frame, make sure you include a clear description of the work you’re charging for and include full details of how to make the payment – find out more about what needs to be included here.

  1. Address your invoice to the person who will be paying it.

Sounds simple, but if your invoice goes straight to the person who makes payments, it will be paid quicker. This person is probably not the one who is delivering the work, and this will avoid the invoice getting lost in someone’s inbox!

  1. Send your invoice as soon as possible

The sooner a client gets an invoice, the sooner they can pay it! Sending invoices promptly also means the work in still in the clients mind, reducing the chance of a forgotten payment.

  1. Keep talking to clients

If the payment becomes overdue, send a reminder, a monthly statement or just pick up the phone and talk to your client. There are many reasons why an invoice is unpaid, so talking to them will not only help you understand why it is late, but also remind your clients that you are serious about getting your invoices paid. If you want to protect your payments, trade credit insurance can help ensure you don’t lose income from unreliable clients.

Read more: Invoice Factoring vs Invoice Discounting: what type of invoice financing is right for your business?

Related products: Business Insurance Credit Insurance Cash Flow Finance Invoice Discounting Specific Account Insurance Bonds & Surety Guarantees Whole-Turnover Insurance Agricultural & Horticultural Credit Insurance Scheme