Ensure customers pay you on time
When does a payment become late?
You can agree any credit period you want with customers but you should agree the payment period before the transaction takes place. Don't assume your usual terms apply as the payment period should be part of your negotiation on pricing and is the period agreed between parties. This agreement can be verbal but it should preferably be in writing.
Industry standards for payment tend to be net monthly - that is, payment at the end of the first full month following receipt of the invoice. These terms are standard as they allow a business to actively plan payments. However, you should negotiate your own terms and price your services accordingly.
Where there is neither an agreement in place nor custom and practice in operation, the law sets a default period of 30 days.
This period starts from whichever of the following is later:
- the date on which the goods are delivered or the service is performed
- the date on which the customer receives notice of the amount of the debt
Purchasers cannot contract out of late payment legislation ie they cannot deny the supplier their right to, for example, charge statutory interest once a payment is overdue.
Prompt Payment Code
The Prompt Payment Code (PPC) is a joint initiative of the Chartered Institute of Credit Management (CICM) and the Department for Business, Energy and Industrial Strategy (BEIS) seeking to identify payment exemplars across both the private and public sectors. The Code is administered by the Office of the Small Business Commissioner (SBC).
Businesses that sign up to the code commit to paying their suppliers on time and to providing clear guidance on payment procedures. Signatories are only allowed to join the Code if they are supported by supplier references.