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Dealing with payment terms and missed invoice due dates

You’ve sent out your invoice on time and have waited patiently to be paid, but the payment deadline has passed by and there is no sign yet from your customer of getting paid. What could you do next? Here are a few things to consider when it comes to chasing payments, broken down into five easy-to-take steps.

  • 1. Discuss payment terms before you start working With new customers, it’s a good idea to agree the payment terms from the outset. On your invoicing template, you can also include details of late payment fees.
  • 2. Send a friendly reminder A few days before your invoice is due, ping a note over to your customer to remind them. If you don’t receive the payment on time, follow up quickly to flag this. Try to stay calm, and don’t be hostile or upset at this stage. Most late payments come down to human error, rather than someone actually trying to avoid paying you. Keep your message short and sweet, with the original invoice attached. If you have more than one invoice to chase, you can combine them into a single statement.
  • 3. Pick up the phone If payment still hasn’t been sorted after a few polite reminders, it’s time to get to the bottom of the problem. When you’re on the phone, it’s harder to be ignored – so get your customer or their accounts person on the line and ask what’s going on. Be friendly, but firm, and aim to get a clear answer as to when you’ll be paid.

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  • 4. Start charging If the invoice goes unpaid for a total of 60 days, and you’ve had no response to your reminders, you might be able to start charging interest (here’s a guide on that).
  • 5. Go nuclear If payment still hasn’t materialised, and you’ve decided you don’t want to work together again, it’s probably time to start exploring more assertive options. There are a number of paths you could take. If the customer is still waiting on work, you could withhold it until the invoice is settled. A lawyer can help prepare a letter threatening legal action against your non-paying customer. It can be daunting, but you do deserve to be paid for the work you do.

Finally, if you decide the money is really not worth the time or effort of continuing to chase it up, you can write the invoice off as a bad debt (which you might be able to claim tax relief on). An accountant will be able to help you with this.

Important note: Asto does not provide advice. You should not take anything in this content as any form of investment, tax, financial, legal or other advice. We have provided this content for your information only. You should not rely on it. Asto is not responsible for the accuracy or completeness of this information. You should seek independent advice as necessary.