What are your payment terms?

As small business owners, we learn early on that we don’t have to work with anyone we don’t want to, that’s one of the many benefits of being your own boss.

So why do so many accept less than okay payment terms?

I’ve asked this question a few times over the last couple of years and again this last week following the news that the large firm Carillion has gone into liquidation with bills in the billions. I’ve worked with a few small business owners to get unpaid invoices sorted out, some months and months old.

Often when I ask why they’re only chasing now, months on, the answer is ‘oh their payment terms are 60, 90, 120 days, it’s normal for large companies’.

‘Their’ is the important word here, their payment terms. That’s unacceptable for a small business to be paid on their terms and it’s not your problem if they can’t manage their accounting to pay you in good time.

Another common phrase ‘it’s normal for big businesses to have longer payment terms’. It was normal in the 60’s for unmarried mothers to be put into children’s homes miles from their families and have their babies removed, but we’ve changed that awful practice.

I digress, as usual.

What are your payment terms?

We all need money, but more than anything we need less stress.

My terms are seven days or 75% upfront for new clients, this is clear in my terms and conditions. I think I used to have it set for 14 days, but when I did my AAT2 bookkeeping course a lightbulb came on (energy efficient one).

If your terms are 14 days and the client doesn’t pay on time you could well be 52 days of work in before you see any money!

Invoice client

    Chase (usually giving 7 days notice)   Possibly paid
30th of month Day 14 Day 15

Day 22


So you’ve worked a whole month up to 30th then it’s another 22 days until you’re paid. If you’ve continued to work for that client, that’s 52 days of paid work you’ve given the client and another invoice is due in 8 days.

Now if your terms are 30 days you’re invoicing for another month’s work on the day you’re due to be paid the first one, so if they’ve not paid the first invoice you’re two months without money from the off.

There’s absolutely nothing stopping you setting your payment terms at 2 hours, after all, that’s how quickly a faster payments transaction goes through the bank.

As it says on the government website:

You can set your own payment terms, such as discounts for early payment and payment upfront.

Unless you agree a payment date, the customer must pay you within 30 days of getting your invoice or the goods or service.

You can use a statutory demand to formally request payment of what you’re owed.

If you’re happy to accept poor payment terms because they’re a large company maybe see if the same works next time you’re at the supermarket. Bag it all up and then tell the checkout operator you’ll be back in four months to pay. Their payment terms are on receipt of goods, so why can’t yours be too?

If you’re going to change your payment terms to protect you and your income a little more, how about adding something like this to your terms so it’s clear from the start of your relationship:

‘My payment terms are seven days. On day eight interest is charged at 8% plus the Bank of England base rate.’

Again, as the government website says: ‘You have the right to charge interest for late payment’.

Shall we change the norm? #paymentin7days