How does invoicing work?

A brief explanation of invoicing and payment terms.


How does invoicing work?

Unless you have agreed alternative payment terms with a customer, UK rules dictate they must pay you within 30 days of receiving your invoice for the goods or services provided.

Some businesses do operate a different model. One familiar scenario being larger companies requiring that smaller suppliers accept payment terms of 90 or even 120 days.

Some companies choose to offer clients discounts for early settlement or payment in advance. Increasingly, SMEs are going further to protect themselves from late payment, and are asking for invoices to be settled within as little as seven days.

The UK is fairly typical among its neighbours in Europe in its approach to invoicing, with payment terms of 30 days from receipt of an invoice being commonplace in most European countries. But this does vary:

  • Scandinavian businesses typically employ a payment deadline of 14 days.
  • Spanish firms set payment terms of 45 days on average, for example
  • Companies in Greece and Italy demand payment within 50 days or more.

How quickly invoices are paid often depends in part on how the document is issued. Manual invoices are slower both to deliver and to be processed at the other end. But modern, automated methods can ensure payments are made quickly and efficiently, even immediately.

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