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Getting paid faster: the gap between the job and the money

Ask a trade business why money comes in slowly and you will hear about customers. Look at the dates and it is usually not the customers. It is the fortnight between the last day on site and the invoice going out, and then the fortnight after that before anyone chases.

Count your own gap first

Take ten finished jobs. Write down the date the work ended and the date the invoice went out. The average of those differences is the number that matters, and in most small firms it is somewhere between ten days and a month. Nothing on the customer side moves until that clock has already run.

Why the invoice is late

Almost always because it has to be assembled. The hours are on a pad, the materials are on a delivery note, the variation was agreed verbally, and somebody has to reconstruct the job before they can bill it. That reconstruction needs a quiet hour, and a quiet hour is the scarcest thing in a busy firm.

When the hours, materials and variations are already sitting on the job, invoicing stops being reconstruction and becomes checking. That is the difference between a job somebody has to find time for and a job that takes four minutes.

Make paying the easy option

• Put a payment link on the invoice. Every extra step between wanting to pay and paying costs you days.
• Invoice the day the work finishes, not at the end of the month. Month-end billing builds an average delay of two weeks into your own process.
• State the terms on the invoice, and make them the same on every invoice.
• For bigger jobs, agree stage payments up front rather than carrying the whole cost to the end.
• Send the first reminder before the due date. It reads as a courtesy rather than a chase, and it catches the invoices that were simply mislaid.

There is no direct debit to fall back on

This is worth saying plainly because it differs from much of Europe: UK business banking sits outside SEPA Direct Debit, so you cannot simply collect the money the way a firm in the Netherlands or Germany would. Invoices here are paid by transfer. That puts more weight on the reminder, because the reminder is doing the job that a mandate does elsewhere.

Chasing that does not depend on remembering

Chasing is unpleasant, which is why it slips. It slips most in the weeks you are busiest, which are exactly the weeks you have the most out. The fix is to take it off the list of things somebody has to decide to do: reminders on a schedule, sent whether or not anyone thought about it, with the person who runs the business only getting involved when the schedule has run out.

What to do about the ones that have run out

A small number of invoices will not respond to reminders. Between businesses you have a statutory right to interest at 8% over the Bank of England base rate, plus a fixed sum per invoice — £40 under £1,000, £70 up to £9,999.99 and £100 at £10,000 or more — and reasonable recovery costs on top of that (Late Payment of Commercial Debts (Interest) Act 1998). With a consumer you only get what your own terms say. Charging it is a commercial decision; being able to name it on the phone is what usually moves a payment. What matters operationally is that they are visible as a short, named list rather than buried in a ledger, so the decision to act on one gets made instead of postponed.