The top five explanations for late payment as recorded on The Prompt Payment Directory in May were…
- Our terms are xx days
- Invoice dispute – after contract agreed
- Accounts clerk only comes on once a week
- Can’t afford to pay the bill
- Changes in payment terms
Below we set out in a bit more detail what these mean and how you should react if you see them on our directory when doing due diligence on a company.
Our terms are xx days
This highlights the critical importance of pre-agreed payment terms. While there is a strong drive to mandate statutory payment terms to be 30 days this is till not the case.
Always make sure you find out what your new customers payment terms are and if they don’t match yours make sure you have pre-agreed payment terms in place or that you are happy with their payment terms.
Remember that large organisations may operate different payment terms in different parts of their business so do not assume that one set of payment terms is the same throughout the business.
Invoice dispute – after contract agreed.
There are two sides to every dispute, in this case the dispute may revolve around some element of contractual obligation. While you may not want to tarnish a new business relationship by raising the possibility of contractual dispute, if the job is very high value agreeing a process for contractual dispute should be part of the principal agreement.
You should also structure your contract in such a way that your invoices do not go unpaid should you be prevented from delivering your goods or services due to the action of inaction of a third party that does not form part of your own cost of doing business.
Accounts clerk only comes on once a week
If you see this explanation given against any payment rating for businesses you are researching on The Prompt Payment Directory then be sure to find out what day the clerk is due in. Also, do ask if there are any exceptional circumstances when that might change and what to do about it if it does change.
Can’t afford to pay the bill
If you see this as the reason given for late payment for a company you are researching on our directory, your next step should be to obtain a credit report from any of the major credit agencies. At the very least get a copy of the most up to date final accounts for the company your are about to do business with.
If you decide to go ahead you should look into the possibility of splitting the payment, part in advance and part in arrears with as much taken in advance as possible. If you have to bear costs in order to complete the work, you should at least ask for the advance to cover the cost of materials.
Changes in payment terms
Before signing a contract or agreeing to move ahead, check your customer’s payment terms, if they differ from yours be sure to pre-agree payment terms in writing and, most important of all, ensure that the contract stipulates the pre-agreed payment terms are to last for the duration of the contract.
NB: These are not the top five most used explanations nationwide, just what has been recored on our directory and they are subject to change.