Setting your payment date to get paid faster

Whether you set the UK average of 30 days to pay, ask for payment sooner, or even later; choosing your payment date could be crucial to getting paid on time.

With the UK having such a notoriously poor payment culture, we have analysed our database of over 297 million invoices within our Trade Payment Data programme to see if changing your payment terms on your invoices can influence how soon you will get paid.

Our Trade Payment Data programme is a wealth of information from real-life payment experiences of businesses worldwide, contributing to the bigger picture of how businesses pay their bills. If your customers are paying late, Creditsafe can show you how many days beyond terms (DBT) an invoice was paid.

When analysing invoices over the previous 12 months within the UK, we found that (with the exception of setting your payment date to 14 days), if your payment date is set to over 28 days, you are more likely to get paid closer to the day you actually ask to get paid than if it is below 28 days.

Surprisingly, setting your payment date to 14 days showed that on average, businesses within the UK were paid on day 17 after issuing their invoice; only 3 days beyond terms. Compared to asking for payment within a week of sending out an invoice, there was a massive difference in how soon you would get paid. Businesses that had a payment date of 7 days from the day of the invoice being issued were paid on day 33; 26 days beyond their set payment term. 

It is a similar story for all payment terms up to 28 days, with all but one (14) having days beyond terms in double figures. In correlation, those same payment terms saw the biggest percentage of invoices being paid late. 

Payment upon completion (0 days), 7 days to pay and 21 days to pay all had at least 80% of their invoices paid late within the last 12 months. However, businesses that asked for payment within 14 days of issuing an invoice had on average 84% of their bills paid on time.

As we look towards longer invoice terms, only 90 days+ saw under 30% of invoices being paid late in the previous year. Compared to the shorter invoice terms, the number of days those invoices were late were a lot less. Where invoices with a set payment date of over 30 days only had on average under 8 days later than the asking date, invoices with less time to pay had a much longer overdue period, with the majority reaching into double figures.

The average 30-day invoice terms for the UK saw 36% of bills paid late, it’s not the worst, but it’s also not the best when this is the standard payment date for businesses to be paid in the UK.

Based on our research, we can already see the businesses changing their invoice terms to either half that of the UK standard or over 30 days are seeing the best results in getting payments in. Therefore if you want to be paid within 30 days, it would make sense to shorten your payment terms to 14 days based on our analysis of invoices in the previous 12 months.

However, if you have the funds to tolerate a longer wait for payment, setting invoice terms over 30 days would give you more of an accurate forecast of when money should be coming into your business. For example, invoices that had a set payment date for 90 days were, on average, only 4 days late. In comparison, a 21-day invoice term has an average DBT of 19 days- a much longer wait that you may not be prepared for. 

• Clear, concise and polite invoicing goes a long way. Ensuring details of your invoice are correct is such an underestimated vitality. Incorrect details such as the wrong name/address/bank details/date, etc. can slow a payment down, so always ensure everything is double checked before the invoice is sent out. Also, a polite manner with clear information such as ‘We would greatly appreciate it if you would kindly pay this invoice within 30 days from X date’ goes a long way.

• Choose terms that will benefit your forecast and cash flow. If there are no set payment terms previously agreed, the customer must pay you within 30 days of getting your invoice and you can take further action if they don’t. However, you can set your own payment terms. Look at your payment ledger and either set a standard term for all invoices or do it per customer. If a customer is notorious for paying late, shorten their payment terms. Nobody knows how your customers pay better than you do, so tailor your approach to protect your cashflow.

• Offer discounts and incentives to early payers. If customers have an incentive to pay you on time, they may prioritise your payment over other suppliers if something is in it for them. By offering discounts on their next payment, or the chance to win a prize if they pay you on time, the promise of something extra for your customer may prompt them to be more proactive.

• Charge late payment fees. Late payment fees can protect your cash flow tremendously and you have every right to exercise interest on late payment fees as long as it’s written into your contract. Read our guide on charging late payment fees, and possibly implement this into your credit control policy.  

Setting up a robust credit control policy to manage your cash flow for any unexpected late payments is vital, alongside monitoring your customers' payment habits. Creditsafe makes it easy to monitor your customers, notifying you if anything (including payment terms) on your customers' credit report changes. 

Can you spot a company in financial distress? Read our blog on what to look out for!