Whenever we work on projects for clients, we often complete the work, raise an invoice and then give them 14 days to pay. Pretty standard. However, the attitude of some companies to ensuring that invoices are paid on time is utterly baffling to me.
Under the Late Payment of Commercial Debts Act, companies are entitled to charge a late payment fee plus interest on any invoice which is not paid within the agreed terms. While we don’t usually do this, we will charge a late payment fee for people who persistently pay late. What follows is a series of e-mails between myself and much larger company (a plc, in fact) to whom we had charged a late payment fee (£70) on an invoice which was 17 days overdue and required constant reminders to get it paid.
It began with a simple email from us (via. Xero) reminding them that although they had paid the invoice, the late payment fee was still unpaid.
We paid the last September invoice on 19 October so we shouldn’t be charged for late payment. And in general, we do not normally accept late payment charges. Please issue a credit for this invoice.
Now, the “September Invoice” they mention was raised on the 2nd September and due on the 2nd October. As this client was a large company and didn’t seem able to meet our normal 14 days, we previously had agreed to extend the terms to 30 days to try to help them stick to them.
I’m not sure why they thought they thought the Late Payment of Commercial Debts Act didn’t apply to them and paying late payment charges were optional.
While in many cases we would waive this, as this company had repeatedly paid late and seemed totally unapologetic about it, I was unwilling to be bullied into allowing the practice to continue.
I replied:
You are correct that the invoice in question was paid on the 19th October but it was due on 2nd October. The terms agreed with you allow you 30 days to pay invoices however you failed to meet this requirement. In light of this we are exercising our right under the Late Payment of Commercial Debts Act to charge a fee for the late payment. This act allows us to charge (and recover through the courts, if necessary) late payment fees for any invoice which is not paid by the appropriate due date.
Unfortunately, you have consistently been unable to pay invoices within our terms. You asked us to extend your terms from our standard 14 to 30 which we agreed however it made no difference to your ability to pay on time. In light of this, we are now charging late payment fees on all late invoices to ensure that future payments are made on time.
There will be no credit note for the late payment fee and it remains due. Please ensure payment is made promptly.
I thought that might be the end of the matter and the payment would be forthcoming. What followed shocked me. I received an email from said company’s Managing Director:
I am very surprised at your approach on this matter.
We have had a very good working relationship with aTech Media. To put that relationship at risk for such a small amount of money is most odd when you have a customer who has continually paid their debts.
I look forward to credit for this invoice.
I’m sorry, what? You’re surprised that we want to be paid on time? It seems as though this good relationship you speak of is rather one way, we do what you want and you don’t pay us on time — hardly fair. Xero tells me this customer’s average time to pay is 50 days! Plus, yet another assumption that we’ll just roll over.
I had to take a couple of minutes to calm myself before replying.
I too am surprised at your approach. Why would you wish to treat a supplier who has worked well with you for the last year with such contempt and continue to pay their invoices late and break the terms which you agreed to? Without checking, I think everyinvoice which we have raised has been paid late despite frequent reminders. We have not charged late payment fees for many of these however enough is enough.
I’m afraid that we will not be bullied by large companies like yourselves who refuse to stick to the agreed terms — we’re a small company who rely on reliable cashflow from our customers.
I didn’t get a reply, however the payment was made about 3 days later.
I heard a statistic that 1 in 5 small businesses fail because of cash flow issues when customers don’t pay their invoices. How many small businesses are being treated like this by larger companies? This isn’t the first time I’ve heard of attitudes like this - we’re so big, we can do whatever we want because you need our business. Actually, unless you’re going to pay me, I don’t need your business, I will happily spend my time working on a few smaller projects for people who will pay promptly without treating me so badly.