It’s common practice for business owners to state the timeframe within which they would like to be paid on the invoices they send. 30 days, for example, is fairly standard.
However, a common misconception is that these terms are legally binding. The truth is that without an agreement from the customer in place prior to sending the invoice, the terms you state are essentially meaningless. Customers – especially larger companies – will pay invoices on their terms, which are usually in excess of 60 days.
Problems can occur when a business owner expects their invoices to be paid by a certain date, only to find themselves waiting a further 30 days or more. In some cases, this can cause damaging cash flow hold up.
The way to solve this problem is to make sure you agree payment terms with your customer before you send the invoice. This can be in a formal contract, or even an email confirming the agreement you have come to. Only then do the payment terms become legally binding.
On the Customer’s Terms
Unfortunately for business owners, in many cases it will be the customer who sets the payment terms. Larger companies often have up to 90 days as standard.
However, knowing the exact payment terms you can expect allows you to plan your cash flow forecast more accurately. You won’t waste time disputing invoice payment dates, and you will be able to plan for the time in between payment. This might be via keeping a little working capital back for that period when you expect cash flow to be down, or it might mean taking advantage of trade finance where necessary.
How Jardine Norton Can Help
If your business is stuck waiting on unpaid invoices, we can help bridge the gap until the time your customer pays. Our fast, flexible trade finance means we can give you the money you need instantly to get your cash flow moving again.
Unlike other finance providers, we don’t tie you in to a long-term agreement, and we don’t require securities against you or your business. It’s flexible, safe and risk free – designed to help your business grow.