How to ensure you get paid correctly and on time

Home Business Network helps you avoid disputes and delays with getting paid.

Work can be – and often is – very satisfying. But so is getting paid. There is no way to ensure 100% that you get paid the full amount and on time. But you can go a long way to avoid delays and disputes by ensuring your bill is correct.

The first thing to learn is that it is not called a Bill. The correct term is Invoice and this is the word that has to be used.

As well as clearly stating it is an invoice, it should also include the following information:
• an unique identification number
• your company name, address and contact information
• the company name and address of the client you are invoicing
• a clear description of the product or service you are charging for
• the date the products or service was provided
• the date of the invoice
• the amount(s) being charged
• VAT amount (if applicable)
• the total amount owed

But that is not all. The law requires you to include certain other information, depending on whether you are a limited company, sole trader and/or VAT registered.

Sole traders’ invoices must include the following additional information:
• any business name being used if the surname of the sole trader is not being used
• a postal address where any legal documents can be delivered to you if you are using a business name

Limited companies’ invoices must include the following additional information:
• the full company name as it appears on the certificate of incorporation
• any business name used in your business
• the company registration number
• an address where any legal documents can be delivered to you if you are using a business name

Limited companies may (but don’t have to) include the names of the directors on their invoices. But if you are going to publish this information on your invoices, you must include the names of all directors.

Are you registered for VAT?
If so - whether you are trading as a limited company or a sole trader – your invoice must also include additional information, namely:
• your business' name, address and VAT registration number
• the quantity of the products or services with a unit price - excluding VAT
• the rate of VAT per item
• the total amount of VAT amount owed without VAT added
• the total amount of VAT

Some clients (particularly big corporations) are unscrupulous - or downright shabby - in trying to delay payment. So it can be a good idea to include additional information to ensure they do not have any excuse for late payment.

Terms and conditions (also known as terms of trade) are the terms of the contract between you and your client. They are designed to protect your rights, limit your liabilities and provide you with security.

Some businesses supply goods and services on the basis of informal, verbal arrangements. But that is a risky way of organising things. There is less chance of a dispute or a delay if your agreement is written down.

Getting your terms and conditions right is important, because if they are inadequate, chasing payment and preventing bad debt can be much more difficult. It may be worth paying for a solicitor when drafting your standard terms.

Your terms and conditions should cover things such as:
• Credit limits and credit periods. If you don't agree a credit period with your customers, the law sets a default period of 30 days.
• Your right to charge interest on late payments and claim compensation for debt recovery costs.
• Delivery arrangements.
• Payment terms. Is it full or part payment in advance or payment in arrears? You could offer a discount for paying by the due date and/or for paying within, for example, seven days of the invoice date.
• A commitment to quality.
• Data protection.

You need to make your customer aware of (and agree to) your terms and conditions. It is best to explain them at the start of your relationship. You could include them with your estimate or quotation, for example, or send them when they place an order. Allow them to discuss with you any problems they have before you raise an invoice.

When you do raise an invoice ensure your terms and conditions are included and remember the law allows you to challenge customers who attempt to impose terms and conditions that remove your rights to claim late payment interest or compensation.