One of the many hats that freelancers and small business owners have to wear is that of the accounts manager – dealing with the invoicing, paying bills, analysing profit and loss, and of course chasing payments from customers.

Unless you are very lucky, there will be times when customers will take advantage of you as a freelancer or small business owner by stretching payment terms beyond what you specify or has been agreed, into something that suites them.   This is true now more than ever with the credit crunch and people using cash flow to prop up companies.

My own payment terms on my invoices is set to 30 days.   When I invoice you, I expect payment in 30 days from the invoice.  Generally, most of my customers are happy with this and pay within these terms.  However, there are large companies I work with who dictate their terms which include payment in 90 days.   As a small business I have two options – accept the terms they state and balance this against the amount of work they will provide, or simply walk away.   It’s a personal choice, but in my business, I have accepted the terms where it is worth while.

As for late payers, I actually love them.    I have a clause in my terms and conditions as shown below, which means that when somebody pays me late, not only do they start paying interest way beyond whatever I could get in a bank account, but they will be invoiced a late payment fee (this was first started by credit card companies, and if it works for them….).   Because of this clause and the penalties, I very rarely have any late payers.

Should the Client fail to make payment within the specified term in accordance with clause 7 above, the Company reserves the right to charge interest at 5% per annum above the Bank of England rate for annual deposits from the time payment is due and to withdraw services and products with the Product Supply Contract until said payments are settled. In addition, the Company reserves the right to render late payment charges of £50 per invoice not settled in full within the agreed payment terms to cover the additional administrative effort.