Below are some of the explanations used to justify late payment of invoices. You will come across some of these when viewing payment ratings on this directory. Click on the links to view suggestions on how you can compensate for them BEFORE going into business with a customer.
As part of the process of agreeing terms with your customer you will need to find out exactly who to send your invoices to. Try and get the name of a person, their direct telephone number and their direct email address, not a generic one such as firstname.lastname@example.org
Having the name of the person who will deal with your invoices will signal your focus on prompt payment and, should the issue arise, it will help you deal with generic excuses like this one by enabling you to directly address the individual responsible instead of being passed from pillar to post in the accounting department.
If you see this explanation given against any payment ratings 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.
If you see this as the reason given for late payment, 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 an advance to cover the cost of materials.
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.
If your potential customer has a payment rating showing against them with this explanation supplied as a reason for late payment you may wish to find out if payment can be made by BACS. Make sure that your bank account details are included with every invoice to make payment by BACS as easy as possible. If BACS is not available as a payment option then make sure you know exactly who will be issuing your cheque.
Be aware that this explanation may also have been given as a stalling tactic.
Switching bank accounts is an onerous task for any company so it’s unlikely to happen often within the same organisation. If you see on our database that a company you are hoping to do business with has any instances where this is cited as an explanation, you should find out if the transfer process is complete.
Be aware that this explanation may also have been given as a stalling tactic.
Before doing business with any organisation that has provided this to a supplier as an explanation for delayed payment, make sure that you have pre-agreed payment terms confirmed in writing preferably by the CFO. In any event it is always better to pre-agree payment terms in writing.
See also ‘changes in payment terms’
Errors on invoices can happen but when they do you may be asked to re-submit the invoice and that could result in a re-setting of the payment term. Be aware that there are both legitimate and unethical reasons governing why this might happen.
If you are doing business with a larger organisation it may have a more onerous and less flexible payment process, that could be due to regulatory requirements so make sure you know exactly what information is required on your invoices. Other less ethical organisations could simply use the presence of an error as an excuse to delay payment until the following billing run. Again, for avoidance of doubt should there be any difference of opinion, make sure you know exactly what should go on the invoice and preferably have it in writing from the customer before signing a contract.
This explanation may be given to devolve responsibility to another person. Make sure you know who is responsible for paying your invoices.
This means either they can’t pay or for some reason they won’t pay. Regardless you should tread carefully. The next step is to obtain a credit rating report and a copy of their most up to date company accounts.
See also: “Can’t afford to pay the bill”
More context will be important here, it takes two to form a dispute and it’s not always clear who’s in the right.
If you see this explanation cited you should seek to find out more about your potential customer’s invoice dispute resolution process. This is also important because if you finally come to refer a dispute to the Government’s proposed Small Business Commissioner one of the first questions you will likely be asked is what measures you have taken to resolve the dispute already.
This is entirely possible. Research indicates that as much as 20% of unpaid invoices are as a result of this reason. If this is the case then the company your are about to do business with may not be an ‘institutional’ later payer. However if you are part of a longer supply chain you should establish a process with your direct customer whereby payments of your invoices are not held up by late payment of invoices further up the supply chain. You should also find out what your immediate customer’s procedure is in the even their invoices are not paid on time.
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.
Make sure you have a contract in place. See above – ‘Invoice dispute – after contract agreed’.
This is often a delaying tactic. If you see this explanation cited it should raise a red flag.
E-invoicing helps however, even if you are simply emailing soft copies of your invoices be sure to follow up with a phone call or another email by replying to an old email conversation (this is one way to be 99% sure your emails get through as you will know they already have done in the past).
Make sure you are sending your invoices to an actual person and not to a generic email address in the account department.
As with the ‘Invoice not received’ explanation, this is quite often used as a delaying tactic. Again, make sure you properly address the invoice and preferably send it by email.
In advance of starting work alway ask if your customer will accept soft copies of your invoice, sent by email. ‘True’ e-invoicing is also another way to tackle this problem, the benefit being that there is increased transparency on both supplier and customer sides so that each can simultaneously see the current state of any given invoice.
Most larger organisations will operate a purchase order system. Sometimes in the haste to begin a new project a PO may not be supplied. You should:
If a purchase order system is in operation and you fail to obtain one before submitting your invoice or you forget to reference it on your invoice, the customer can’t be blamed for paying late. This may also affect your efforts to mediate a resolution via the government’s proposed Small Business Commissioner should you seek his / her involvement.
If you see this explanation cited on our directory and you intend to do business with the company for which the rating is given, your should enquire about BACS as an alternative method of payment.
Seeing this explanation cited for a company you intend to do business with should prompt you to enquire about the process for settling invoices. In the event that it requires a two step process involving the raising of the check by one person in the accounts department and a counter signature from a (company) director or even that a director be the sole signatory, you should be clear about what the entire process is and how long it is expected to take.
As above, the preferred method of payment should be electronic transfer.
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 their business.
Always, always include clearly identifiable payment instructions on all your invoices no matter how long you have been doing business with the same company for.
Find out what this date is before starting work on the project. This explanation can only be used once assuming you are invoicing more than once at different stages over a given period of time.
If you see this explanation cited on our directory it may be less of a concern if you are beginning a new business relationship with this customer. The author of the rating may have experienced this problem but it would be reasonable to expect that the departed employee’s responsibilities will either have been re-allocated to another employee or a new employee will have been hired as a replacement.
If you’re in an existing business relationship with a customer and you see this explanation cited on our directory then you should reach out to your contact in their accounts department and confirm if the departure affects their payments to you and if it does what do you need to do to ensure payments continue to be made on time.
Again, always try and find out exactly who will be responsible for expediting payment of your invoices.
If you see this as an explanation given, it is likely that the situation will no longer be an issue by the time your invoice falls due. However, it may have been used as a delaying tactic.
If you think that your customer may be prone to IT issues that affect their capacity to settle your invoices then find out what alternative arrangements they have in place for manually settling invoices.
All large organisations should have manual backup procedures for settling invoices in the event of a systems failure. All smaller organisations will be more familiar with their chequebooks anyway.
Tread softly here, there’s always a chance it could be true.
If you see this explanation cited for a company you are hoping to do business with it may be less of an issue. It is reasonable to expect that the deceased’s responsibilities will have been reallocated to another employee or a replacement will have been hired, however you should remain cautious.
If you are currently doing business with an organisation and you see this explanation appear on your customer’s page on The Prompt Payment Directory and you think this may also affect your remuneration arrangements then you will need to be sensitive to this potential situation. Assume that there is truth in the statement and politely enquire if you should be sending your invoices to a new contact henceforth.
This is most likely a delaying tactic. If you see this explanation cited for a company you are about to engage in business, before starting work on the job be sure to enquire about the possibility of other forms of payment such as BACS.
It’s always possible. This could possibly lead to a contractual dispute. If you see this explanation given it could indicate that you are about to do business with a customer that likes to extract every last drop of value from their suppliers, possibly to a level that is unreasonable. Be sure you have a watertight contract in place first and try to be as thorough as possible in the level of detail.
As also mentioned here, you should make sure that your contract is structured 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.
This is a spurious explanation. The likelihood is that an accompanying ‘low star’ payment rating will only have been posted on our directory by a supplier after the terms of payment have been exceeded (most likely by quite a long period) which, by definition, means that the customer will have already missed at least one payment run. That would indicate the supplier that posted the rating was given this explanation after one payment run had already been made.
This could indicate an institutionalised policy of late payment.
Always send original invoices together with a purchase order, if you have one, and your bank details (for BACS payments) clearly displayed on the invoice.
Also be sure to ask in advance what constitutes an original invoice, it could refer to a hard copy on company headed note paper. Although an increasingly outdated method of invoicing, the absence of a hard copy on company headed notepaper could have a material impact on prompt payment if you invoice electronically.
Additionally, if you see this explanation you should ask well in advance if you need to supply company header notepaper to your customer’s accounts department in order to be set up as a supplier. In most cases where this is required you will be asked for it but a proactive approach on the part of you as the supplier will help.