A late payment policy should set out when payment is due, what counts as late, how you will chase overdue invoices and what happens if they remain unpaid. Put it in writing, agree it with the customer before you start work, and reference it in your terms and conditions and on every invoice you issue.
Typical contents include:
- Payment terms and the exact due date, stated in days from the invoice date
- Accepted payment methods and the details customers need to pay you
- Your reminder timetable and who sends each stage
- Whether you will charge interest or claim compensation on overdue accounts, and on what basis
- The point at which you suspend further work or supply
- The point at which the debt is passed to a third party for recovery
- How disputed invoices are raised and resolved, and by when
Be realistic about what you will actually enforce. A policy that threatens action you never take is worse than no policy at all, because customers quickly learn your real deadline. Equally, applying charges inconsistently can cause friction and may be challenged.
Your policy has to work as a contract term, so it is worth having a solicitor or your accountant review the wording before you adopt it. CWAF is a finance broker and cannot advise on the drafting or enforceability of your terms.