Payment Protection – A quick guide

The Centre for Retail Research indicated that 2012 was the worst year since 2008 for failing retail businesses.

Over 50 high street businesses went bankrupt in 2012 and our ever decreasing high streets are looking emptier. One way in which a business can protect itself from going bankrupt is ensuring that its clients and customers pay on time and in full.

Whether you’ve been stung in the past, or simply wish to take some proactive steps to protect your business, this article may just be the most useful article you’ve read all week. Whether you supply goods and/or services to businesses or to consumers, I invite all readers to review their contractual documentation for the provisions of goods and services and consider the following:

  • If your contractual documents include payment periods beyond 30 days, this can damage your cash flow. The consequences are greater reliance on expensive banking facilities including your overdraft. Check your payment terms are 30 days or less, and ensure that this period runs from the date of your invoice rather than its receipt.
  • Do your contractual documents include an ability to charge interest on late payment? If not, then you could be missing out on legitimate charges from your clients and customers. A reasonable rate of interest can help meet the additional costs of banking facilities relied upon when a client or customer fails to pay.
  • If your contractual documentation does not provide the right to increase your prices for goods and/or services then you could be unnecessarily bearing the cost of additional costs in your supply chain, raw materials, staffing costs or otherwise.
  • Where you undertake work or source materials or equipment prior to the of supply goods and/or services are you able to require advance payment? Part funding your clients or customers in this way can be a huge drain on your finances. Include an express right to charge advance payment and this will help.

Where you sell your goods and/or services to a business the following are also worth consideration:

  • Do your payment terms include the magic phrase “time is of the essence”? If not, you could be missing out on additional rights to terminate the contract in the event that a customer fails to pay.
  • If you are not restricting your customer’s right to withhold or deduct amounts from payment to you, or reserving your own rights to set off any amount owed to the client from any amounts payable to you, then you could also be missing out on amounts due or owed. These are known as rights to “set off”.

If you would like to discuss any of the points raised in more detail, please contact Greg Bullock on 01283 526220 or email

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