How much time should you give your customers to pay an invoice?

In the business world, payment management is a crucial aspect that can have a significant impact on a company's cash flow. The question of payment terms, i.e. the time given to customers to settle an invoice, is therefore central. This article explores the different payment terms, the legal aspects of invoicing, and strategies for optimizing payment management and dealing with delays.

Different payment terms

Payment terms vary according to a number of factors, including business sector, customer relationship, amount and current market practices. Standard terms often include :

• Immediate payment: used for real-time transactions (internet, store, often for hardware).
• 30 days end of month: allows the customer to pay the invoice within 30 days of the end of the billing month (most common in B2B and sales of services: suitable for recruitment).
• Customized day calculations: some choose a specific number of days (45, 60, etc.) after the invoice date (to be adapted according to your business model, if you have working capital, if the amounts are high, etc.).

Legal aspects of invoicing

Legislation often regulates payment terms to prevent abuse. For example, in some countries, the maximum period allowed may be 60 days. It's crucial to find out about the laws applicable in your jurisdiction to define a compliant credit policy. Be careful not to get involved in a legal dispute right away, as it's not uncommon to exceed this time limit slightly (depending on the company's payment habits, or because of forgetfulness).

Optimal Payment Management

For efficient management, we recommend :

• Define a clear credit policy: establish precise rules concerning payment terms and communicate them clearly from the outset of the business relationship. Ignoring these issues for fear of discussing them is a serious mistake that will have far-reaching repercussions shortly afterwards. It's essential to make things clear beforehand, and to make sure they're clear to everyone. You don't want to waste time on legal proceedings for bad payers.
• Use Invoice Management Tools: Software can help you track invoices, calculate deadlines and send automatic reminders. Automation will save you precious time and hassle ;)
• Payment reminders: In the event of late payment, a structured reminder procedure is essential. Start with friendly reminders before escalating the situation.tip: don't go straight to the credo - accusing your customers of being late will only embitter them. Instead, try forgetting or offering payment solutions ("I see the invoice payment is a little late, do you need us to set up a payment schedule?" - generally speaking, no one wants to be considered a bad payer).

Reduce payment times

To speed up payments, consider the following tips:

• Early payment incentives: Offer discounts for early payment.
• Penalties for late payment: Late payment fees may encourage customers to pay on time.
• Electronic invoicing: Reduces invoice processing and dispatch times.
• Outsource your payments: some payment solutions, such as Alma, pay you the invoiced amount right away, and take care of collecting the money from your customer. No more reminders, no more tension over overdue invoices, no more worries.

Dealing with late payments

Despite all precautions, late payments can happen. Here's how to deal with them:

• Proactive communication: Contact the customer to understand the reason for the delay. It's really important to get to the bottom of the delay. You'll strengthen your relationship with them and find a solution more quickly.
• Payment plan: If the customer is experiencing financial difficulties, propose a payment schedule, deferment or other solution that suits them without jeopardizing your situation.
• Legal recourse: As a last resort, legal action may be necessary. Contact specialized lawyers.

Conclusion

Managing payment terms is a delicate balance between maintaining good customer relations and ensuring sound management of the company's cash flow. On average, companies tend to opt for 30 days end of month, but this standard can vary. It's essential to calculate the term that's right for your business, while remaining flexible and attentive to your customers' needs. A well-defined credit policy, combined with proactive management of invoicing and reminders, can greatly contribute to your company's financial health.