You can try one Percent Ten Net 30 (1% 10 net 30) - This term is an incentive for the buyer to pay within ten days of the invoice date. If payment is made within ten days, the buyer may take a one percent discount. If the invoice is not paid in 10 days, the full amount is due within 30 days.
Say invoice value is 100 and customer pays within 10 days then you get 99 which is tagged against invoice and 1 is recorded as discount allowed
Also personally when I get client to sign engagement letter i mention in fee section that your annual fixed fee will be for example £1200 payable monthly through Direct Debit, if you decide not to then annual fee will be £1600. You can save £400 and ease of cash flow at same time.
I don’t do either on a regular basis for various reasons but the method Accountant mentions would work best and is what some of my suppliers use. It is very difficult to add a late fee onto an invoice and also get someone to pay it, and if they do then they generally aren’t happy about it but adding it to the invoice to start with and then removing it for early payments will work the same but will get less complaints and more happy customers. It also means customers will try and pay early so it’s a win win.
For late payments of business to business transactions, after 30 days you can charge ‘statutory interest’ which is currently 8% plus the Bank of England base rate for business to business transactions, unless a different of interest is specified in a contract.
The payment is considered late after 30 days when either:
**- The customer gets the invoice.
You deliver the goods or provide the service (if this is later).**
Follow the steps below to charge interest on late payments:
Step 1: Add Default Warning to Invoices:
It’s good practice to add the following warning to your invoice:
“We reserve the right to charge interest on late paid invoices at the rate of 8% above bank base rates under the Late Payment of Commercial Debts (Interest) Act 1998.”
The warning can be added by selecting ‘Account Setting >> Invoice Customisation’ from the top navigation menu, followed by ‘Invoice Notes’ from the ‘Invoice Style’ area:
That’s correct @Parker1090 , it acts as a subtle reminder and you’re under no obligation to enforce, you can make that decision at the time.
Also there’s no reason why both methods cannot be applied and notes added to the invoice accordingly i.e. discount incentive to pay the invoice early and penalty interest deterrent to pay the invoice late.
I’m a bit late to the party but … We’re currently experiencing our 1st major late payment since the regulations changed and I’m pushing my solicitors to add costs as well as interest -
i) Would you recommend issuing additional invoices for each extra cost / bill from our solicitors & the costs of my time incurred ? .
ii) With the interest charged at a daily amount the actual invoice amount changes on a daily basis - does this mean we should we i) keep amending the invoice ii) issue new ones iii) is there a sneaky trick within QuickFile to keep it up to date?
I’m certainly looking to add on the compensation under s5A and the additional costs (such as court fees, solicitors fees etc etc).
In terms of invoicing, I’ve placed a statement that the amount increases daily (similar to the one @Joe put on his invoice example), but I too am interest to know how people deal with daily changing invoices and additional costs.
Yeah, I think my ‘concern’ (it’s not the right word) was around how we keep the balance due current.
Likewise, with the suggestions made for prompt payments - is it possible to automate those discounts?