First off, you should make it nice and easy for people to pay you. Make it as simple as possible by issuing invoices straight away and putting your bank details on the invoice along with the due date and any purchase order/contact. If you have the Starling Business Toolkit, you can issue invoices instantly with your online banking.
On a big project it’s a good idea to follow up the invoice with a call to your contact, to ensure that they are happy with the completion of the work and that they have approved the invoice. Document their approval (in case there’s any future dispute). Your contact may not be the person making the actual payment, so ask about the next stage in the approval/payment chain and the expected payment dates.
How to chase unpaid invoices
If the invoice isn’t paid on the due date, then it’s worth a polite enquiry to the accounts department to check that they have all the correct paperwork and to resend anything missing. Ask when the overdue invoice will be paid. If you have not formally agreed a due date then the invoice is overdue 30 days after either:
- The customer receives the invoices, or
- You deliver the goods/services.
And the 30 days from above is calculated after the latest in date of the above two items.
In other words, if you have agreed a payment date then that is the due date. If there is no specific agreement then it depends on the date of the delivery and invoice. If you invoice before the customer receives the goods then the invoice is overdue 30 days after the delivery date. If the invoice is sent after delivery then the relevant date is 30 days after the invoice date.
Once the invoice is overdue you will need to keep chasing every seven days, or more frequently. It’s worth putting this in writing so that you have a record. Chase every seven days for, perhaps, a month, depending on what sort of excuses are being given. At this point you need to get more serious with a more formal overdue invoice letter including a seven day warning that you will commence legal action.
How much interest can you charge on overdue invoices?
This will depend on your terms and conditions, but small companies are allowed to charge interest on late business payments of 8% above the Bank of England base rate. In practice charging the interest will often prompt payment although the interest is usually unpaid. It’s up to you whether you feel it’s worth pursuing payment of the interest.
The easiest way to get paid is to send a prompt and complete invoice to the right person with the right purchase order number and then to chase early. Find out more about how to write an invoice and what it should include.