This article was last updated 0 months ago and may not represent current law.
The old adage says that “cash is king”, and in difficult economic times it’s never more true. Indeed, it is such an issue that there’s a Government initiative known as the Fair Payment Code (it replaced the old Prompt Payment Code), which is run by the Small Business Commissioner.
Businesses signing up to the Fair Payment Code apply for one of three awards, depending on how quickly they pay their own suppliers:
- Gold, for paying at least 95% of invoices within 30 days
- Silver, for paying at least 95% of invoices within 60 days, including at least 95% of invoices from small businesses within 30 days
- Bronze, for paying at least 95% of invoices within 60 days.
However, in practice, there’s some really easy and practical tips that can help get your small business paid quickly and on time.
- Have terms and conditions in place from the outset, which include payment terms, and the right to charge interest and claim compensation and legal fees if payment is late. Asking for prompt payment is nothing to be afraid of.
- Send invoices promptly. Many online accounts software such as Xero and Quickbooks allow invoices to be sent easily and quickly, and even remind you when they are overdue. But importantly, it is always wise to follow the invoice up a few days later, but no more than 7 days, to double check that it was received and that everything was as expected on it. This gives an opportunity to confirm receipt (and so avoid the excuse that it was never received) and also allows the customer to raise any issues such as the amount or the work done etc.
- Do a great job. It sounds obvious, but if you do a great job, exceed expectations in terms of service or price, then customers usually are happy to pay you sooner. It also reduces the possibility of any disputes.
- Chase for payment. Many small businesses fail to ask for prompt payment and then fail to follow up the sending of invoices. Automated reminders sent on 7 days, 14 days and 21 days are a good idea and usually encourage prompt payment.
Sometimes of course invoices remain unpaid, through silence or despite promises. You may need to consider taking further action, such as commencing a Money Claim Online. This is a relatively simple process which most small business owners would be able to do online. It requires you to input a variety of details about the claim into the Money Claim Online website and pay a fee to the Court, but it will then lead to either payment, a CCJ or (if disputed) a Small Claims Court Hearing.
If you would rather have a solicitor chase the debt, I should say that I don’t run debt claims myself. I refer them to my Nexa colleague Ailsa Fairchild, who does debt recovery for businesses and will quote her own fee, so get in touch if you’d like an introduction.
Written by Steven Mather, a business solicitor acting on company sales and purchases. This is general information about the law, not legal advice on your situation. Law correct as at .
