Friday 15 June 2012

How to get your invoices paid

Over the last 27 years as a procurement professional I've negotiated many different payment terms with suppliers. This blog isn't about the validity of those payment terms whether: in advance, on delivery, 14 days, 30 days, 60 days and beyond. It's about the things you can do as a supplier to maximise the likelihood of you being paid in line with the terms agreed.

I have to admit there will always be companies with cash flow problems. There will also always be dishonest companies wanting to find ways to not pay what they owe. I can't offer much advice on those companies other than say do please ensure you undertake due diligence ahead of accepting orders from anyone. In addition most late payers have a history of such and with social media it wont take too much investigation to find out if your new potential client is one of these.

I do however have advice on how to facilitate getting invoices paid by companies wanting to pay invoices in line with terms agreed:

A few things to remember ahead of time, because whilst you might be dealing with people once it gets to payment you're often dealing with systems and you need to know how to make the system support what has been agreed, :
  • the person placing the order should have authority to do so within their company,
  • the person placing the order may see responsibility for paying as the role of another department and not even think about it,
  • the person paying the invoice is very unlikely to be the person who placed the order and often knows nothing about what was agreed,
  • your invoice may need to be allocated to an appropriate budget heading before being paid,
  • someone will need to authorise the invoice and that may not be the person who placed the order or who actually pays it,
  • many larger organisations have '000s of invoices arriving daily which is why they rely on a system to pay them - or have set times in the month when all payments are processed, 
  • payment of invoices is always set up to default to the buyers terms unless agreed, communicated to the appropriate department and amended on the system otherwise. Saying it's been agreed on your invoice won't often be enough to override this default as they will get many many invoices all stating supplier standard terms despite the buyers terms being agreed,
  • even if someone agrees different payment terms to the organisational standard they may not have permission to do so.
With that in mind here's what I do:
  • Along with price, and other terms, agree payment terms.
  • Understand what their normal payment terms are.
  • If payment terms agreed are different from their standard terms you need to find out if they have authority to agree them. and then ask how that will be handled (does someone else need to know ahead of time, do systems needs to be changed, when would they need the invoice, will it be cheque or BACS etc).
  • Ask for an order number - for most organisations this is essential. Without an order how can you know that the person placing the order is authorised to do so. In a systemised business without an order number how can accounts payable know who needs to authorise it and/or be able to track it back to the budget it needs to be allocated to?
  • Find out what details they need on the invoice - the type of info I would suggest needs including covers: order number, person who placed the order, full details of service/products supplied and when, payment terms agreed and with whom and of course price. 
  • Find out who to send the invoice to - often this may not be the person who placed the order and could be in a different office, town, country.
  • Raise invoice in line with payment terms - if you've agreed payment on delivery or, I'd suggest, within 21 days of such, you may need to raise the invoice some weeks ahead to be able to allow their system to process it and still pay you to the terms agreed.
  • If the payment terms agreed are not their standard you may want to add an additional covering note as a means of highlighting they need to treat this invoice differently to others - just saying I know your standard terms are x but Mr z agreed you'd pay me in y - please contact me if you have any problems 
  • Send it to the person/department you were told to.
One word of caution the more your payment relies on manual intervention (ie it sits outside their normal terms) the more likely it is to fail - because people have other work to do, take holidays, are ill or absent from work. They might have thought they could pay you 14 days from delivery but if it sits unopened in someones in tray for 2 weeks you're the person who suffers.

I'm afraid it's up to you to make sure you understand the system for payment within the company and make sure you use it to get your invoice paid. Payment is often the last thing the person placing the order thinks about and yet is the only thing the person in Accounts Payable wants to do - and can with a little help from you.

Alison Smith
The Purchasing Coach
Sowing the seeds for effective working relationships with suppliers

Paid stamp picture Source: via Alison on Pinterest


  1. Thanks Alison - next, I would be interested in your views on the practice of adding (and, moreover, actually charging) interest on overdue invoices.

  2. Okay gauntlet picked up and will blog about it next week.

    More than happy to blog about any other related procurement subjects too if others want to suggest topics.