One of the constants of (UK) business seems to be late payment. I’ve seen many articles written about this, and it’s an unfortunate situation. But the reality is that when you send someone an invoice, the chances are that you’re not going to see the money for well over a month for the following reasons:
- You have to give a “reasonable” payment period on the invoice, which can be anything from 14 to 60 days. (30 days is fairly typical)
- Clients will often count the date of the invoice from when they receive it, not when it’s dated
- They have to send you a payment, and they will use 2nd class mail
- It’s likely the payment will take at least 3 days to clear
All in all, it’s a difficult situation when you’re on a tight cash-flow.
And people pay late.
So is there anything you can do about this situation, or do you just have to starve for your first two months of business? Well, if you’re bootstrapping your business it’s less of a worry, but in high-level terms, you have two choices:
- Join the culture – make sure you pay the bills that you receive on the last possible day and earn the extra few pounds/pence from the interest of having the balance in your account
- Fight the lack of good manners – pay your bills in a reasonable time, (eg. in the middle of the period) and politely demand that your clients do the same
I pass no judgement on either. Whichever is right/best is left as an exercise for the reader.