Getting paid on time, how to get paid in 30 days
In business we focus on profit, we calculate our hourly rate on how much we want to get paid, but getting paid is actually more important than profit. Why? Without payment you won’t have profit – without profit you won’t be able to pay yourself or others. Here I explain how easy it is to get paid in 30 days.
Why are you giving 30 days credit?
Now, the first thing to think about is why you’re giving 30 days. Is that because you think business expects it?
Well, they don’t. You can set whatever payment terms you want.
The average UK business pays 15 days late
I know that seems a little strange but it does depend on how people work and yes, in the UK the average is 15 days late. It doesn’t mean you have to accept 15 days late, but do consider it.
If in your cashflow forecast you’ve put the people who will pay you on 30 days, then you need to take out 15 of that. Give people 15 day payment terms, the vast majority of people will pay you by the time your invoice is 30 days.
There is a myth that in business you have to give 30 days.
If you don’t specify any terms on your invoice, then under the late payment of Commercial Debt Interest Act 1998, the government will assume an invoice is overdue when it reaches 30 days.
However, if you specify different credit terms on your invoice and in your terms and conditions, then providing you haven’t signed a contract stating something different, yours are the legally binding terms.
This means that your payment date and your payment terms are the one your customers have to adhere to.
Don’t wait until an invoice is overdue to call
You think you can’t call a customer about an invoice before it is overdue, wrong.
“How actively do you look for referrals for your contacts and clients?
I called one of my ‘big’ clients last night after sending them my invoice (that’s a trick I learnt from Rachael Chiverton by the way) and got into conversation with them (it is what I do).
Turns out there are three things that she is specifically after, all of which I can source from within my network.
So, I mentioned three names to her, told her I would effect an introduction to each, and have now sent three Emails copying in both her and the person I’m referring.
The conversation with my client lasted 24 minutes, I’ve invested about another 30 minutes in calling the people I am referring and then writing the Emails. So an hour out of my life or thereabouts. And not an invoiceable hour.
And PS Rachael, during the very friendly conversation I did confirm that A) the invoice had been received and B) “do you just want to take a moment to check it Miss Client” got the client to confirm that the details, including my immediate payment terms, were correct. Good advice that “.
Who could you help by making an earlier call and getting your invoice paid on time?
Now over to you:
Have a think about when you want to get paid, subtract 15 from that number and use that as your payment terms.
If you do that, the date that you want to get paid will on average be the latest that you’ll get paid.
Or even as Stefan did, review why you are giving credit at all.