- 07 Apr
Do You Know The Standard Payment Terms Your Customers Can Take?
Did you know that the standard payment terms in the UK are 30 days from the date of your invoice?
Standard Credit Terms
Many will not be aware that if you did not specify payment terms within the contract with your customer, there are default standard credit terms that will apply to your invoice. At the current time, those are payment within 30 days of the invoice date. You can check this for yourself on the government website.
Contracts And Terms & Conditions
This means that if you raised your invoice, expecting it to be paid for example, by return, but you had not specified this within the terms and conditions of the arrangement, your customer could legally withhold their payment for 30 days. Therefore, it is important that you specify the terms of payment within the contract or terms and conditions that govern your transactions. This also avoids any misunderstanding regarding what the credit period is.
Payment Terms In Practice
There can be a significant difference between these roles and payment terms taken in practice. Despite this standard period of credit, it is common to see UK businesses taking a longer credit period to pay. Often we come across businesses that are waiting 60 days or more for payments to be received.
Many companies also have standard payment practices, for example they pay at the end of the month following receipt of the invoice. This may be applied by a large company on a blanket basis.
The answer is to agree the payment terms upfront, and include them both within the underlying contract and on the sales invoices that you raise. It is good practice to ensure that the customer has signed the contract or terms and conditions, Confirming their agreement to the contents.
Help Collecting Debts
If you are having trouble collecting in your outstanding debts, please see our free credit control guide which explains how to approach collection of invoices with a business. If you do not want to undertake this function yourself, you could consider using an outsourced service that will provide the credit control for your business.
Alternatively, you could use the services of a receivables financing company to bridge the time between raising your invoice and getting paid by your customers. They will provide you with a prepayment against your invoice, at the point you raise it, meaning that you do not need to wait to be paid.