Contractors' Questions: Whose payment terms dictate; mine or theirs?

Contractor’s Question: For customers of my ‘Plan B’ business, I try to operate on a standard 50% up front, 50% upon completion payment term.

With one of my regulars, I’m a bit more relaxed so I just send them a monthly invoice without specifying a particular timeframe and they normally pay promptly.

This month, I asked if the payment could be made immediately, all together  and they agreed, but stated that in future they’ll operate on a 15-30 day payment term. This is not compatible with my standard term of getting half the cash up front and half upon completion. Whose terms are going to dictate; mine or theirs?

Expert’s Answer: If you have terms and conditions which dictate your terms of payment and your customer has received a copy of those same terms prior to ordering any work, then, unless the customer has sent an official order with their own terms and conditions detailing their payment terms, the supplier’s terms – yours - would generally apply.

However if the customer sends in an order and one of the terms relates to payment and when they will pay, unless the supplier responds with an order acknowledgement reiterating their terms of payment, then the purchaser’s terms would be deemed to apply, generally.

Basically it's the last piece of paper in the contractual chain which dictates whose terms apply.

Just for your reference, 30-day end of month terms are generally the accepted payment terms for companies dependent upon their activities. Obvious exceptions are firms in the Road Haulage Industry, which tends to operate on 60-day end of month terms.

The expert was Sid Home, of debt recovery specialist Safe Collections.

Tuesday 18th Aug 2015
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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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