‘Please pay the total amount to us within 7 days.’ What happens if you don’t comply? When supplying goods or services to companies, you must comply with statutory payment terms. This has been established at European level.
In short, it comes down to the following: if nothing has been laid down, there is a legal payment term of 30 days . You are therefore expected to pay your bills within 30 days. But if you still haven’t paid after 30 days, it can’t be enforced. According to the European legislator, companies have 60 days to pay invoices. Those 60 days for companies is mandatory law. A maximum period of 30 days applies to governments, barring exceptions. In all cases, a creditor may demand interest after 30 days, usually 8% to 10% per annum. If a customer does not pay or does not pay on time, you may also charge a standard fee of € 40 plus a fee for any legal costs or collection costs.
If a customer doesn’t pay on time, you can send them a reminder. You can even do that two or three times, but you are not allowed to charge for that. Usually the tone becomes more and more compelling with each subsequent reminder. If that still does not lead to payment, you can proceed with a collection procedure in which you must first formally declare the debtor in default. Debt collection agencies know exactly how this works and can help you with it.
So much for late payers and defaulters, but what about shorter payment terms, as above? Can a company impose a payment term of seven days? The answer is no. An invoice is not an agreement and the payment term is therefore not legally valid. You can kindly ask to pay within seven days, but you can’t legally enforce it. A payment term shorter than the statutory payment term cannot be enforced once the sale has been concluded. A supplier can draw up general terms and conditions, but these must then be known to the buyer and accepted by him at the time of purchase. This is especially useful in a long-term trading relationship. For one-off purchase transactions, it is wise to include the payment term in the quotation.
Many business owners have a tight schedule for payments: every day, every week, every two weeks or every month. With the help of bookkeeping tools you can create payment orders that are executed on precise days. For a good relationship with your suppliers, I recommend to stick to the payment term of the supplier. And for good cash flow, it is recommended not to pay much earlier than the due date. It really makes me happy when entrepreneurs pay their bills immediately.
By the way
If your customers are consumers, the European directive does not apply and you can determine the payment term yourself, provided that this falls within reasonable limits. You must then include the payment term in your general terms and conditions.