Payment Terms

Payment Terms

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All of my clients are currently on 14 days payment terms.  The majority pay on receipt of invoice however there are a couple who delay beyond the 14 terms and who I continually have to chase.  I offer very competitive fees and so consider that this delay is taking advantage considering that they're getting a very good deal in the first place!

I am now considering reducing my terms.  What are typical payment terms within accountancy and do you have the same terms for all your clients or does it vary?

Many thanks

Replies (8)

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By User deleted
13th Feb 2011 18:34

Payment upfront

All new clients I take on (and most existing ones) either pay upfront (i.e. monthly by standing order / direct transfer for the year ahead) or in full on provision of information. This way I don't get bad debts or have to waste time chasing. Those that don't are on 14 days but they're ones I trust to pay. I've had some in the past that have taken their own sweet time to pay so I'm cynical now. Those that quibble about this are the ones likely to mess me around so I'd definitely want their dosh upfront! 

Have to admit I wouldn't want to pay upfront myself but then I wouldn't withhold payment or delay it so I'd be the perfect customer anyway :) 

Why not ask for payment upfront for the couple who do mess you around? I'm sure there would be a tactful way of wording it so they didn't take offence.....  

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By lenny
13th Feb 2011 20:04

Monthly payments

All are on monthly payments in advance, the fees are agreed then divided into 10 montly installments (fees are then paid beore year end) after completing all paperwork the fees are then agreed for the folowing year, no bad payers and we are all happy...Simples

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By rhangus.
17th Feb 2011 10:31

TERMS?

You must be joking.

I send the fee note out  and client knows that payment should really be ASAP as chances are its been discussed at a meeting.

Terms are way too impersonal. I'm trying to build my business on giving all clients that personal touch and let them feel like their the special one.

Relax, take that stuffy shirt and tie off and get the tshirt and jeans on.

Then get stuck in to some work.

Terms?

What next?

What's the correct apr to charge?

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By ShirleyM
17th Feb 2011 11:58

Sarah

Most of our clients pay their annual fees through monthly direct debit. The others pay 50% in advance, and the balance is paid on approval of the work (before submission to HMRC). We occasionally ask for 100% advance payments if we think it necessary. We never return records, or submit returns, until payment is received.

We have a few clients that need monthly work that is not included in annual fees, and these monthly invoices are collected by direct debit.

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By Sarah K Dunks
17th Feb 2011 12:11

Many thanks for those constructive comments.

As for the non-constructive, I don't see why you waste your time posting on here. 

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By User deleted
17th Feb 2011 12:25

Agree with Shirley

I'd second what Shirley says about not returning records or submitting anything until payment is received in full. Once you've done that you've lost any hold over the less enthusiastic payers.

And make sure your engagement letters are clear about your terms just in case you ever need to refer to them.

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By JackJoshua
17th Feb 2011 13:38

Change of terms

Personally I think your clients are going to find it bad practice by you to change your terms from say 14 days to payment up front.

If I'm in business I expect a bit of credit and to suddenly ask for money up front will make it appear you are struggling with money.

Our terms were thirty days and clients paid when they were ready. We changed to 21 days on the advice of someone who said if you say 30 days then clients take 60. The clients didn't change.

We now send the invoice and then a statement after our term period has expired. This covers 90% of our payments. Month 2 is another statement with an "overdue" on it and month 3 is a letter stating about further action. Month 4 would probably be pay by x date or court but nothing really gets past month 2.

Yes, I have had the odd bad debt but I feel I would not gain as much business if I asked payment up front.

For example we need a photographer for our upcoming wedding and if any ask for payment in full before the date then they won't be getting my business. As much as you feel your customer may not pay, your customer may feel you won't provide the service.

 

 

 

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By Sarah K Dunks
17th Feb 2011 14:19

Going forward

Thanks Jack Joshua.  Yes good advice, I wasn't going to change the terms for current clients but just to new clients going forward.  I too would be concerned as to paying 100% if I was a client, I suppose it's just trying to get the balance right to please both the client and myself.

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