Setting the Right Payment Terms on Your Invoices
How to set payment terms that actually get you paid, what the law lets you charge on late invoices, and how to chase without the awkwardness.
Why your terms decide your cashflow
Your payment terms are the difference between getting paid next week and getting paid whenever the customer gets round to it. Vague terms, or none at all, train people to pay late. Clear ones set the expectation before the work even starts.
The best terms are short and obvious. Nobody reads a wall of small print, so the rules you actually want to enforce need to be right there on the invoice, in plain words.
Match the terms to the job
A two hour repair and a three week bathroom refit shouldn't carry the same terms. The bigger the job, and the more you're out of pocket on materials, the more you want to protect yourself up front.
- Small jobs: payment on completion, or net 7. There's no reason to wait a month for a £200 repair.
- Medium jobs: net 7 or net 14 from the invoice date works for most trades.
- Larger jobs: take a deposit before you start and stage the payments, so you're never funding the customer's project out of your own pocket.
Always take a deposit on bigger work
A deposit does two jobs at once. It covers your materials, so you're not buying a kitchen's worth of units on your own card, and it commits the customer. Someone who's paid a deposit is far less likely to go cold on you. A third up front, a stage payment partway through, and the balance on completion is a fair structure most customers accept without blinking.
What you can charge when someone pays late
If your customer is another business, the Late Payment of Commercial Debts (Interest) Act 1998 is on your side. Where you haven't agreed your own terms, you can charge statutory interest of 8% above the Bank of England base rate, plus a fixed sum per invoice to cover the cost of chasing it.
- £40 for a debt under £1,000.
- £70 for a debt between £1,000 and £9,999.99.
- £100 for a debt of £10,000 or more.
Domestic customers are different
You can't apply that Act to a homeowner. What you can do is set your own late payment terms in writing before the job starts, and as long as they're fair and the customer agreed to them, they hold. Either way, the point of a late fee isn't really the money. It's giving people a reason to pay you on time.
Make paying you the easy option
People pay the invoice that's easiest to pay. If yours needs them to dig out your sort code and log into their banking app, it slips down the pile. Put a payment link or a pay button on the invoice itself and you take the friction away. Letting them pay on the spot beats waiting on a bank transfer they have to remember to make.
Chase early, and let a system do it
Most late invoices aren't people refusing to pay. They've forgotten. A friendly reminder a couple of days before the due date, and another the day after if it's still open, clears most of them with no awkwardness at all. The hard part is remembering to send them when you're on the tools all day, which is exactly why it's worth automating.
How Traddie helps
Traddie lets you set standard terms once, so every invoice goes out consistent, adds a payment link so customers can pay in a couple of taps, and sends the reminders for you before and after the due date. You set it up once and the chasing happens in the background while you get on with the work.