30 days payment terms

bullinn1

Hi chaps ... I'm a freelancer designer and have a really good new client ... I invoice when the job's completed and everyones happy.

These days I really don't expect them to pay too quickly so after 30 days I send a statement and then a few days later a polite email and or telephone call, this generally works and a bacs payment arrives within a few more days (with a few days delayed clearance) so eventually I wait, probably 6 weeks for the dosh.

This, of course, is all down to the young assistant in the accounts department.

I don't push things too hard as I enjoy the work and the people I deal with (who really have nothing to do with the accounts and I don't want to trouble them) are really good and we have a good relationship and I don't want to lose the work.

Anyway I will get to the point, I sent a couple of invoices last month - when I sent a statement I got an email saying that they had not received the invoices detailed in the statement ... oh well these things happen. But the the girl I'm dealing with is saying that THEIR terms are 30 days and that will be from the date they received them not my 'invoice' date - I suggested that this was wrong !

So when we talk about "payment terms" who sets these the terms ... the 'buyer' or the 'seller' - when I invoice should they agree to MY terms or should I ask them what THEIR payment terms are ?

Sorry this has gone on ...
Roger

Stan_Here

Most commercial relationships are based around a pre-agreed contract where the payment terms are agreed before the work is carried out or the product is supplied. Generally, payment terms are "controlled" by the buyer, who would state what the terms are for him to buy the product/service, but this all depends on the power of the parties.

It is usual for a large firm who is buying from a small company or a freelancer to dictate the terms, but there are occasions where the small company or freelancer has some additional power, such as the critical nature of the product or service, that they are able to change the terms to those that are better.

Where a pre-agreed contract is not in place a company may place a purchase order, and if you accept that order and carry out the service/supply the product then the small print on the back of the PO is the contract, so the buyer gets his way as you have accepted his terms.

This situation sounds like neither of the above apply and that a more informal approach has been taken, which leaves both parties somewhat at risk. In general terms, both contracts and POs will state that a valid invoice (containing all details of the service, correct company information, VAT No etc) will be paid xx days after receipt (not date) of the invoice, so your delay in issuing an invoice is not doing you any favours, because until they have received the invoice and registered it in their systems, the clock does not start ticking, either against a contract, or in this case, their general policy.

It sounds like you do not have much in the way of a contract to fall back on, and in any case, whatever number of days is agreed it only starts when they get your invoice, so I would be inclined to accept the situation on this occasion. Whether you feel that the relationship might be soured if you started to insist on a contract of some sort or written payment terms is for you to judge, but you can certainly tighten up your own side of the arrangement by sending out your invoice immediately on completion of the work. This way, even if you do not want to go to a formal contract, you will start the payment clock as soon as the work is done.

bullinn1

Thank you so much Stan ... you have summed up the situation perfectly and have put my mind at rest, in as much as I can now not worrying about them taking the p*^% and live within their 'rules' and as you quite rightly say I should send my invoice promptly, which I do of course but the fly in the ointment was the two 'lost' or 'not received' documents, I was not aware of their loss until they received my 'statement' after 30 days so this will now be a 60 day payment term !

I will send my invoices electronically in the future so there can be less chance of 'loss'.

Good of you to take the time.

Roger

nomnomnom

when the client placed the order with you did they send you a copy of their terms? if not then they should pay you when you ask. ignore them saying they won't pay until 30 days after they receive your invoice they're tryiny it on. like you say, do all you can to ensure they receive your invoices promptly but you cannot guarantee it so stick to your guns and tell them you want payment as per your t&c. they know when they ordered from you so they can't say they aren't paying until they choose.

paddyrg

It stinks, and is standard practice sadly. Suppliers including small businesses are a source of free cashflow to their big corporate clients. Some corporate clients go further though - some have 45, 60, 75, 90 day terms. Some will only pay at the end of the month following the minimum term so can be upto 105 days (check out some high street pharmacies for those terms!). Then of course there is the 'no invoice without PO' slipperyness, and getting a PO issued takes...another month of course. Or even more malicious, one company out there whose terms are something like 60 days, however if they do pay you within those 60 days, they will automatically discount your invoice by a few %! Yes, as well as being a free line of credit you are also subsidising them.

Filthy behaviour, and sadly very normal.

Savvy_Sue

rogertb wrote: »

I don't push things too hard as I enjoy the work and the people I deal with (who really have nothing to do with the accounts and I don't want to trouble them) are really good and we have a good relationship and I don't want to lose the work.

Sometimes it's worth making the people you're dealing with aware of the problems you're having with getting payments. You know, just checking in a friendly way that you're submitting your invoices correctly, that there isn't anything they're supposed to do to authorise your invoice, that it's going to the right person etc.

We've tightened up our payment procedures in the last few months, and it does now take longer to get money out. However, if one of my colleagues said that there was an issue with someone we needed to pay, I'd do my best to sort it. That would usually be by making sure that a) we'd had the invoice and b) that it had gone to the right manager to be approved and c) it had then been passed on to the right person for payment.

bullinn1

Thanks for all your contributions, really interesting - what I have gleaned form you comments are the 'correct' procedures so that when I do push a little harder for payment (in the most polite way I can muster) I will have the 'facts' ... Regards Roger

paulwf

BACS payments between business accounts generally take a few minutes and all funds should be cleared by the start of the next working day. It will depend on banks and their bacs policy but it sounds like the company might be trying it on (if not speak to your bank about faster clearing).

Anyway, in many industries since the recession it is now standard at small business level to pay cash on delivery or cleared payment up front. In some cases it is now getting ridiculous, companies wanting payment before they'll even discuss doing business or people wanting an invoice paid before they have generated it which of course isn't possible!

I'm just mentioning this so you can see you aren't being unreasonable generating your invoice immediately on completion, and you certainly aren't being unreasonable speaking to your account contacts about it and giving the accounts department frequent nudges. Any form of credit these days is a luxury so don't feel bad about chasing them. I know it won't have a major impact as that's the way your industry works but stand up for yourself, they won't feel bad about you asking for payment.

bullinn1

Thanks Paul ... I'm actually not sure it's bacs, it's some kind of funds transfer but when the notification email arrives I seem to remember it saying something like "this transfer will take place on 'x' date) 'x' date always being several days after the mail ! - I guess they'll try anything, pretty pointless really on the piddly amounts we're talking about I can't imagine they're going to make any real money holding off payment, in fact it probably costs them more in admin staff answering the phone and emails from 'suppliers' chasing there money !

Roger

heretolearn_2

With most businesses these days it's a case of robbing Peter to pay Paul. Cashflow is tough to manage. Firms pay the essentials: rent, utilities, suppliers of raw materials etc first. Everything else comes after that. And anyone who keeps quiet and doesn't ask for/nag/credit control for their money is bottom of that list.

There's nothing wrong in calling asking for your money/update on payment date/etc. It's normal business to business activity. You have to push a bit not to end up at the bottom priority.

Mistral001

When this sort of thing first happened to me, I was fuming, but when I settled down and contacted my accountant I was less angry, but still annoyed and the business relationship with the firm was never the same as far as I was concerned.

Basically what they are doing is saying these are our terms, take it or leave it. Flexing their muscle? A new and ambitious (over-ambitious probably) manager? Maybe. Also maybe a big client/customer of theirs has extended their payment terms and they are just passing it on to you.

Maybe a chat with the person who changed the terms will help. It could have been a mistake. If it is not a mistake then its down to negotiating with them. You need to give the impression that you are in a powerful position. If you give the impression that you are having cashflow problems yourself, you will be radiating powerlessness.