Reply to: 7 day payment terms - invoice overdue already, hwo soon to chase?

[Safe Collections]

You're a snide one, aren't you?

The OP was making a perfectly reasonable point about how to approach client relationships. I rather agree. I assume the people I am doing business with are straightforward unless I have reason to think otherwise.

We aren't being snide, that post was directed to Platypus and his statement that real businesses don't like to be called prior to an invoices due date. It was not directed at the OP.

I don't think it's snide at all.

It's not at all unusual for a businesses to contact their creditors in advance of the payment due date to ensure that everything is Ok and the payment will be made on time.

Thinking back, it was probably one of the first lessons I learned about business as a young boy watching how my dad operated. Firm but fair with the creditors and it cuts both ways - your creditors have to pay you on time so you can settle your own debts on time.

Not everyone's business runs at a massive profit like contractors do, so good cashflow and credit control can mean the difference between the success and failure of the business. I know that one from bitter experience.

That final paragraph sums it up for us. Every company, irrespective of size and industry need to make credit control a key part of the business. Leave it as an afterthought and it will be a case of when, not if, your company gets burnt by a non-paying customer.

[Wanderer]

You're a snide one, aren't you?

I don't think it's snide at all.

It's not at all unusual for a businesses to contact their creditors in advance of the payment due date to ensure that everything is Ok and the payment will be made on time.

Thinking back, it was probably one of the first lessons I learned about business as a young boy watching how my dad operated. Firm but fair with the creditors and it cuts both ways - your creditors have to pay you on time so you can settle your own debts on time.

Not everyone's business runs at a massive profit like contractors do, so good cashflow and credit control can mean the difference between the success and failure of the business. I know that one from bitter experience.

[Old Greg]

Conversely, many real businesses like to ensure that invoices they have issued have been received and that they are free from queries and the like before the payment date.

But each to their own...

You're a snide one, aren't you?

The OP was making a perfectly reasonable point about how to approach client relationships. I rather agree. I assume the people I am doing business with are straightforward unless I have reason to think otherwise.

[Safe Collections]

Poor advice IMO.

IME real businesses do not like being phoned up to ensure that an invoice will be paid on time.

Conversely, many real businesses like to ensure that invoices they have issued have been received and that they are free from queries and the like before the payment date.

But each to their own...

[SarahL2012]

If you are serious about getting paid on time then you start chasing it before it is even due to be paid. Get to know the people in the accounts team and make sure everything is in order and approved ready to be paid on schedule. Keep following it up to make sure there are no problems because they will probably just let it fail rather than pro actively contacting you...

Speaking as an accountant who has had many an Accounts Payable department under her remit in ex-permie roles, this is exactly the right approach to take!

When its your first invoice start off with a really polite email / call to the AP department just saying that you've sent in your first invoice, due on xth day and does the AP team have everything they need from YourCo to make payment on time?

I always let an invoice go 48 hours overdue without sending a reminder, but then polite email (written evidence) to AP department reminding them that YourCo was due payment 2 days ago is starter.

After that you need to get a bit firmer and also say that you may put statutory interest charges on the invoice. Keep copies of emails and if you get to a month overdue then send a formal letter saying that you will involve solicitors etc and company will have to pay legal charges (plenty of templates if you google)

No point in waiting around. A fellow contractor is working with a company who did a systems transfer a few weeks ago and automatically put ALL suppliers onto 60 day payment terms. They're waiting for suppliers to phone up about non payment before they 1) pay them and 2) correct the payment terms on the system.

[escapeUK]

Poor advice IMO.

IME real businesses do not like being phoned up to ensure that an invoice will be paid on time.

Well of course they dont, then they can not pay it. The clientco I contract for will not pay anyone who hasnt chased, one chase will put you on a payment list but you might be bumped off it if cash is tight, two chases means you are serious and will get paid.

[Platypus]

then you start chasing it before it is even due to be paid.

Poor advice IMO.

IME real businesses do not like being phoned up to ensure that an invoice will be paid on time.

[Wanderer]

How soon should I get more aggressive about the payment?

If you are serious about getting paid on time then you start chasing it before it is even due to be paid. Get to know the people in the accounts team and make sure everything is in order and approved ready to be paid on schedule. Keep following it up to make sure there are no problems because they will probably just let it fail rather than pro actively contacting you...

[Safe Collections]

I think it is a pretty sound method to use rather than firing off adhoc communication and then blowing a fuse. Cojak mentioned it awhile ago and I have tried it rather than just going off on one and it worked quite well. Just passing on experience.

We were just kidding

We agree that having a defined set of credit control procedures is a must for any business.

Oh and Dunning is an American term that is not well known here in blighty

Just make sure you look at the wikipiedia definition and NOT the urban dictionary one!

Mistaking the two could lead to some, how shall we say, interesting discussions with the client

[northernladuk]

What is it with you and Dunning?

I think it is a pretty sound method to use rather than firing off adhoc communication and then blowing a fuse. Cojak mentioned it awhile ago and I have tried it rather than just going off on one and it worked quite well. Just passing on experience.

Just make sure you look at the wikipiedia definition and NOT the urban dictionary one!

[Safe Collections]

Hi.

I have a client that I have been rather suspicious with from the start.
Typically my end client is a Fortune500 company and in this case it's a consultancy doing a project for a Fortune500 company.
Due to this relative lack of credibility, I negotiated 7 days payment terms. Today is 7 days from my first invoice.
In the morning, I have sent a gentle reminder to the accountant, PM and CEO.
They have acknowledged receiving the invoice last week, I also have deliverables (piece of software) hosted on my server.

How soon should I get more aggressive about the payment?
I imagine that on Friday afternoon, in the middle of the summer, someone might have missed the impending deadline, so I will definitely wait until Monday, but other than trying to get in touch with them, how soon should I start chasing this through other means (a letter from my solicitor, Small Claims Court etc)?
At the moment, the project & development is ongoing, but I think it's rather reasonable that I cut my losses early if they can't even pay the 1st invoice on time?

If you have negotiated seven day terms and they have been accepted, the onus is on the consultancy firm to comply with your payment terms.

We would definitely agree that sending a friendly reminder is a good start as you need to show the consultancy client that when you say seven day payment, you really do mean 7 days.

It may be a bit early to start getting "aggressive" with your chasing, but if you have doubts about the ability of the consultancy to pay you do need to look to reduce your risk.

As a very general guide if it gets to due date of invoice 4 and invoice 1, 2 & 3 are still unpaid that would be the time to cease supply of services until all your invoices are paid in full.

We always pay our contractor suppliers in seven days or less, it may slightly increase our admin but it is perfectly possible.

Look up the term Dunning...

What is it with you and Dunning?

[SimonMac]

You mention fortune 500, so I assume its a US company, given they would have just had 4th July and its the 1st invoice I would chase today, but certainly not "aggressively"

[Platypus]

IMHO I would give them the benefit of the doubt for a week or 2, give them time to get it all in order.

Yes. Getting you into the system and payments set up means that first payments can often take longer than subsequent ones. I'd wait until Wednesday, so when when they say "oh no, sorry, you're not in the system" there is still time to get you paid by the end of the week.

[Scrag Meister]

IMHO I would give them the benefit of the doubt for a week or 2, give them time to get it all in order.

I was rather cautious when I was only given monthly billing and an initial 7 week lead to payment, but every thing has now been moving along just fine for 16 months. Invoice end of first week of each month, paid around the 21st of each month, also means I have some time in hand so when I leave I still recieve an invoice payment mid way through the month I leave and the month after, unless I leave bang on the end of the month.

[Boo]

I have a client that I have been rather suspicious with from the start.
Typically my end client is a Fortune500 company and in this case it's a consultancy doing a project for a Fortune500 company.
Due to this relative lack of credibility, I negotiated 7 days payment terms. Today is 7 days from my first invoice.
In the morning, I have sent a gentle reminder to the accountant, PM and CEO.
They have acknowledged receiving the invoice last week, I also have deliverables (piece of software) hosted on my server.

How soon should I get more aggressive about the payment?
I imagine that on Friday afternoon, in the middle of the summer, someone might have missed the impending deadline, so I will definitely wait until Monday, but other than trying to get in touch with them, how soon should I start chasing this through other means (a letter from my solicitor, Small Claims Court etc)?
At the moment, the project & development is ongoing, but I think it's rather reasonable that I cut my losses early if they can't even pay the 1st invoice on time?

It's up to you, but I am on 30 day terms and monthly invoicing and I have not been at all backward about things, sending reminders and requests to be notified about payment schedules in advance of the 30 days. The first payment was made fairly promptly but I let my chasing of the second payment slip a bit and when I finally got round to asking a few days before the end of the 30 days they shilly-shally'd about whether it's be one week or the next. A quick email explaining that I could not give extended credit terms, copied to their manager in charge of the project I'm working on, put an end to that and I got paid on the earlier payment run.

So my advice is chase it before they're due to pay and get a payment date. If they don't meet that then you need to poke them a bit harder but don't just let things slide - the banks are holding the taps to a thin trickle for UK businesses atm and you won't get paid on time unless you are uppermost in your customer's mind.

But I wouldn't do anything to put the project in jeopardy until I was certain there was something amiss.

Good luck,

Boo