Invoicing and Getting Paid on Time
Small businesses commonly attribute late payment to difficult customers. In practice a large share of it traces to invoices that were unclear, sent late, sent to the wrong person, or never chased.
Getting the invoice right
Include everything the customer's accounts system needs: a unique invoice number, the date, a clear description of what was supplied, the amount, any tax, payment terms and the due date as an actual date rather than a number of days.
Include the purchase order number where the customer uses them. Invoices without a PO are frequently rejected automatically by larger organisations and sit unpaid without anyone telling you.
Include bank details clearly and consistently. Changing them mid-relationship invites both delay and fraud suspicion.
Send it to the right place
Larger organisations have an accounts payable function that is not the person who engaged you. Sending only to your contact means the invoice waits until they forward it, if they remember.
Establish at the outset who receives invoices, in what format, and what their payment run schedule is. Missing a payment run by a day can mean waiting a month.
Terms and enforcement
Agree payment terms in writing before starting. Thirty days is common; shorter terms are negotiable, particularly for smaller suppliers.
Many jurisdictions provide a statutory right to interest and recovery costs on late commercial payments. Referencing that entitlement on the invoice is legitimate and occasionally sufficient on its own.
Deposits for new customers and staged payments for longer projects reduce exposure considerably. A deposit also filters out customers who were never going to pay.
Chasing systematically
Send the invoice immediately on completion, not at month end. Time between the work and the invoice reduces the sense of obligation.
Send a polite reminder a few days before the due date confirming it is scheduled, which catches invoices that were never entered.
Follow up on the day after it falls due, then weekly, escalating from email to telephone. Phoning is markedly more effective than emailing and most people avoid it.
Keep the tone factual throughout. The aim is payment, not satisfaction.
When it does not work
A formal letter before action, setting out the debt and a deadline, resolves a substantial proportion of remaining cases.
Small claims procedures exist for straightforward undisputed debts and are designed to be used without a lawyer.
Assess whether the customer can actually pay before spending money pursuing them. A judgment against an insolvent business achieves nothing.
Prevention
Credit-check new commercial customers before extending significant terms.
Set a limit on outstanding balance per customer, and stop work when it is exceeded rather than continuing and hoping.
Notice patterns: a customer who pays progressively later is frequently in difficulty, and acting early puts you ahead of other creditors.
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