In many small companies payment terms are decided on the spot. One customer gets 14 days because they asked nicely, another gets 60 because they are large, and a third pays by card because that was easiest for the person who sent the invoice. Nobody chose this. It simply accumulated, and months later nobody can say what was agreed with whom.
This makes cash flow hard to predict and collection awkward, because the reminder you send depends on a term that nobody can find. The fix is small: a default, a short list of payment methods and a rule for exceptions. This article describes a version that fits a team of three to fifty people. It is about setting terms before the invoice goes out; what to do after a due date has passed is covered in late customer payments and chasing a late invoice politely.
Choose one default payment term
Pick a standard that applies unless something else is agreed in writing. Common choices are 14 or 30 days from the invoice date. Shorter terms help your cash, longer ones are easier to win from larger customers. Decide by looking at two things:
- Your own obligations. If you pay suppliers and salaries in 30 days, a 60-day customer term means you finance them.
- What customers in your field accept. Check a few recent quotes and ask which terms customers actually wrote back.
Write the default down in one sentence, for example: "Invoices are payable within 14 days of the invoice date." Use the same sentence everywhere.
Offer a few payment methods
Every method adds work: someone has to check it, match it to an invoice and handle mistakes. For most small companies two or three are enough:
- Bank transfer. The usual default for business customers. Put the account number, the payment reference and the invoice number in a fixed place on the invoice.
- Card or online payment link. Useful for smaller amounts and new customers. Check the fee and when the money arrives in your account.
- Direct debit. Worth it for regular monthly services, but it needs a signed mandate and someone who monitors failed collections.
Cash and cheques are usually not worth the handling. If you accept them, say when and up to what amount. Whatever you offer, make sure the person who reconciles payments can see them in one place.
Deposits and staged payments
For larger or longer work, one invoice at the end puts all the risk on you. Consider:
- A deposit before work starts, for example 30 percent for a new customer or for work that needs materials.
- Staged payments tied to visible milestones, such as the delivery of a design or the first working version.
- Payment on delivery for small, quick jobs.
Say in the quote which of these applies and what happens if a stage is paid late: work pauses until payment arrives. Write this as a plain statement, not as a threat.
What to write on the invoice
A clear invoice is paid faster. Check that every one shows:
- the invoice number, issue date and due date as an actual date, not only "14 days";
- the amount, currency and what it covers;
- the payment methods you accept and the details for each;
- the payment reference the customer should use;
- a contact for questions, preferably a shared mailbox rather than one person's address;
- the consequence of late payment, as agreed in the contract or required by law.
In many countries late commercial payments carry statutory interest or a fixed recovery fee. The UK government explains its rules in late commercial payments: interest and debt recovery; other countries have their own, so check the rule that applies to you before quoting a figure.
Decide who agrees exceptions
Exceptions will come: a customer wants 45 days, a split into three payments, or payment by a method you do not offer. The problem is not the exception itself but that everyone grants them. Agree on this:
- One person (the owner or finance lead) may approve exceptions. Others say "I will check and come back to you".
- Limits: for example, up to 30 days longer than the default for customers with a good payment history, nothing beyond that without the owner.
- A short list: customer, agreed term, reason, date and approver. A shared sheet with five columns is enough.
When an exception is granted, put it in the contract or the order confirmation. A verbal promise is hard to prove when the invoice is overdue.
Make sure customers see the terms before the invoice
The invoice should not be the first time a customer reads your terms. Put the default term and the payment methods in three places: the quote, the contract or order confirmation, and the invoice itself. For new customers, say it once in the first conversation. A customer who has read "payable in 14 days" three times is rarely surprised on day 15.
Review once a year
Once a year, spend an hour with the invoice list. For each customer, compare the agreed term with the real days to payment. Three questions are enough: which customers regularly pay late, which exceptions are no longer needed, and which payment method causes the most manual work. Change the default or the list of methods if the data says so, write down the new version and use it for new quotes from that date.
