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Reduce your Invoice payment days and improve your cash flow.

Updated: Aug 18, 2022

As the Supplier of goods and services to other businesses in the UK, you have the power to decide payment terms prior to commencing business.


We use the term “Negotiation” quite lightly as the supplier under UK legislation is entitled to set payment terms. The common misconception in the UK is that it is the business customers which can set their own payment terms which the Supplier has to adhere to, however this is not the case.


In accordance with the Late Payment 2013 legislation the business supplying goods and services has the right to set their terms of payment. Of course, this has to be fair, fit and proper although there is nothing stopping you from asking for payment within 7 days for instance rather than the standard 30 day term most businesses tend to opt for.

Of course your business customer may want to negotiate a longer term and perhaps will look elsewhere if you are unwilling to negotiate but as a supplier that is your choice to make. Too often suppliers, especially small and medium-sized businesses cave into the demands of larger businesses and simply let them dictate terms or don’t even question or realise that it is in fact they who can set terms of payment.


Under the Late Payments Act 2013 the UK recommends Invoices be paid no later than 30 days for public entities and 60 days for private entities, although in recent years this has been shortened to 30 days for both public and private organisations. Ultimately, as a business you have to decide whether your business can thrive on waiting potentially up to 60 days for payment. If you cannot then you are potentially gambling you’re the future sustainability of your business as you also have to take into account a worst case scenario i.e. potentially waiting even longer than 60 days as almost 1 in 3 invoices are paid late – putting your cashflow through a serious stress test.


The business world is a brutal place at times and there are numerous unfortunate stories about businesses taking on a large contract or business customer but ultimately failing due to poor cash-flow with one of the main reasons being, delays to invoice payments. Does the reward therefore outweigh the reward?


The Invoicey Business Invoice performance register can help you check to see how large businesses signed up to the prompt payment code are performing with respect to paying invoices on-time.


If it is a business with a reputable background and a good invoice payment score then you perhaps may feel comfortable that you want to provide them 30 days grace period for paying the invoice balance. Any business which has a healthy set of accounts should be capable of settling their invoices within 30 days.


However if your dealing with a business or public entity which has a history of paying late or your business is perhaps not in a position to allow 30 day payment terms then perhaps recommend payment within 7 days of good and services rendered. Be firm, clear and polite about this before you transact with your business customer so they are clear of terms. Changing this midway through a business transaction isn’t impossible but may look unprofessional towards your business customer and could also be difficult to reverse if you have signed a contract beforehand (however if the contract is deemed unfair and falls below statutory legislation you may not be eligible to change terms of payment) – best practice would be to still give them notice of your intentions if you wish to do so.


Alternatively, you could ask for payment upfront by issuing a proforma Invoice which requires businesses to pay for goods and services prior to release.

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