The payment terms you agree with a client have a direct impact on your cash flow, your workload, and ultimately the viability of your business.
This guide covers how to set and negotiate payment terms with new clients, how to respond when a client asks for longer terms or tries to dictate their own, what the law says about your rights, and what to do when terms break down entirely.
Table of Contents
What Are Standard B2B Payment Terms?
The most common standard in UK B2B contracts is 30 days from the invoice date, and this is also the legal default under the Late Payment of Commercial Debts (Interest) Act 1998. So if no payment period is agreed in writing, payment is considered due 30 days after the invoice date.
However, 30 days is a default, not a requirement. You are entitled to set shorter terms if that suits your business, be that 7 days, 14 days, or even payment on delivery.
Similarly, clients sometimes push for 60 or 90 day terms, particularly larger businesses managing their own cash flow. Whether you accept longer terms is a commercial decision, but you should never feel obliged to agree to terms that damage your business.
The law also sets limits on what clients can impose. Under the Late Payment Act, payment terms that are grossly unfair to the supplier can be challenged. Public sector clients must pay within 30 days by law. For private sector contracts, terms beyond 60 days can only be imposed if they are not grossly unfair and are expressly agreed in writing.
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How to Negotiate Payment Terms With a New Client
The best time to negotiate payment terms is before any work begins.
Raising terms early signals that you run a professional operation and that payment is a serious part of the relationship, not an afterthought. It also gives you time to walk away if the client’s expectations are incompatible with your needs, and before you have invested significant time or resource.
When negotiating terms with a new client, follow these steps:
- State your terms clearly and in writing from the outset. Include the payment period, accepted payment methods, and your policy on late payment interest and fees. Do not leave these as verbal understandings. We have a guide to agreeing credit terms that will help with this.
- Get a signature on your agreement before work begins. A signed contract or purchase order with your terms attached is the foundation of any enforceable payment arrangement.
- Ask for the name and email address of the person in the accounts department who will process your invoices. Sending invoices to the right person reduces the risk of them being delayed or lost.
- Consider requesting a deposit for larger projects, particularly with new clients you have not worked with before. A 25-50% upfront payment reduces your exposure and tests the client’s willingness to pay before you commit fully.
If the client proposes terms that are longer than you would like, negotiate rather than simply accepting. Explain your business reasons (cash flow requirements, project costs, the size of your team) in practical terms. A reasonable client will understand.
How Should You Respond When a Customer Asks for Extended Payment Terms?
When an existing or prospective client asks for extended payment terms (longer than you currently offer, or longer than you are comfortable with), resist the instinct to agree immediately.
Start by understanding why they are asking. A client requesting 60 days instead of 30 may have a genuine cash flow cycle that drives this, or they may be managing their own working capital at your expense. The reason matters because it tells you something about the risk of working with them.
Then consider the practical impact on your business. If accepting 60-day terms means you need to use expensive short-term credit to cover your own costs, that cost should be factored into whether the contract is worth taking.
For low-margin work, extended terms can turn a profitable contract into a loss-making one.
If you decide to negotiate rather than simply accept or refuse, try the following:
- Offer a prompt payment discount as an incentive for faster payment. A 1-2% discount for payment within 7-14 days costs less than a credit facility and may be more appealing to the client than you expect.
- Propose staged payments as a compromise. For example, 50% on commencement and 50% on completion rather than the full amount at 60 days.
Resubmit your own terms in writing after any discussion, stating clearly that your standard terms remain in force. As a general rule, the last set of terms submitted takes precedence, so always make sure you have the final word in writing.
Whatever you agree to, document it. A variation to payment terms should be confirmed in writing by both parties before work proceeds under the new arrangement.
Can a Client Legally Override Your Payment Terms?
This is one of the most common misconceptions among small businesses and freelancers. Many assume that because a large client says their terms apply, those terms automatically take precedence. This is not always the case.
In contract law, the terms that govern a commercial agreement are generally those that were agreed (explicitly or implicitly) at the point the contract was formed.
If you submitted your terms before the client submitted theirs, and work proceeded without explicit agreement to their terms, there is a reasonable argument that your terms apply.
In practice, this is complicated by the back-and-forth exchange of terms that often happens in B2B relationships. The safest protection is to ensure your terms are submitted last and explicitly accepted in writing before work begins.
Under the Late Payment of Commercial Debts (Interest) Act, any contractual term that removes or varies the supplier’s right to claim statutory interest must not be grossly unfair. A court can override terms that are deemed to give the debtor a substantial contractual advantage without justification. This gives small suppliers a degree of legal protection even when they have signed an agreement with unfavourable terms.
If a client is insisting their terms override yours and you are uncertain of your position, take legal advice before signing anything.
Can You Change Payment Terms for Existing Customers?
Yes, but how you do it matters.
Unilaterally changing payment terms without notice or agreement is not enforceable. You cannot simply issue an invoice with new terms and expect them to apply if your client has not agreed to them.
The correct approach is to:
- Notify the client in writing that your terms are changing
- Give reasonable notice of when the new terms will take effect
- Ask for written confirmation that they accept the new arrangement.
For long-standing clients, a conversation before the written notice is good practice.
If you are tightening terms (for example moving from 30 days to 14 days), be prepared for some clients to push back. Having a clear business reason to communicate (rising costs, cash flow requirements, a change in your business model) makes the conversation easier.
If a client refuses to accept revised terms and you are unwilling to continue on the old terms, you may need to decide whether to continue the relationship. This is a commercial judgement, but a client who will not accept reasonable payment terms may be a credit risk in the making.
How to Enforce Payment Terms If a Client Won’t Comply
Agreeing terms is only half the equation. If a client does not pay within the agreed period, you need to act quickly and systematically.
- Send a formal written reminder. On the day after the due date, send a written reminder referencing the invoice number, amount, due date, and your payment details. Keep the tone professional and factual. Follow up with a phone call.
- Claim statutory interest and late payment fees. Under the Late Payment of Commercial Debts (Interest) Act, you are entitled to charge interest at 8% above the Bank of England base rate on overdue B2B invoices. You can also claim a fixed debt recovery cost of between £40 and £100, depending on the invoice value. Reminding the client of these charges signals that you are serious and that delay has a cost. Use our free late payment calculator to calculate exactly what you are owed.
- Escalate your communications. If reminders are ignored, send a formal letter before action stating that you intend to pursue the debt if payment is not received within a specified period, typically 7-14 days. This letter should be sent by recorded post as well as email.
- Instruct a debt recovery agency. If direct chasing has not produced payment, a “no collection, no commission” debt recovery service means you pay nothing unless the debt is recovered. An agency will apply professional pressure that many clients respond to when they have ignored direct contact from the supplier.
Taking Extra Care With International Clients
Payment terms with international clients carry additional complexity that goes beyond the choice of payment method.
The most important question to address before work begins is which country’s law governs the contract. If this is not specified, it may default to the law of the client’s country, which could significantly affect your rights if payment is not made. Always specify in your contract that English law applies and that disputes will be resolved in English courts. This makes it considerably easier to pursue a debt if things go wrong.
Currency risk is another consideration. If you are invoicing in a currency other than sterling, exchange rate movements between the invoice date and payment date can erode your margin. Consider invoicing in sterling or using a hedging service for larger contracts.
On payment processing, make sure you have agreed on a method that works practically for both parties before work begins. International bank transfers, Wise, and other services vary significantly in speed, cost, and availability depending on the client’s country. Unwieldy payment processors that are slow or expensive on your end can effectively extend your payment terms even when the client pays on time.
If an international client does not pay, recovery is more complex than for a UK client, and specialist support is worth seeking earlier rather than later.
Template: Payment Terms Letter to a New Client
Use this as a starting point when setting out your payment terms with a new client. Adapt it to your specific situation and have it reviewed by a legal professional if the contract is significant.
Dear [Client name],
Thank you for choosing to work with [Your business name]. We are looking forward to [brief description of project or service].
Before we begin, I wanted to set out our standard payment terms so that we are both clear on expectations from the outset.
Payment terms: [X] days from the date of invoice
Accepted payment methods: [Bank transfer / BACS / other]
Bank details: [Sort code, account number, or IBAN for international clients]
Late payment: In the event that an invoice remains unpaid after the due date, we reserve the right to charge statutory interest under the Late Payment of Commercial Debts (Interest) Act 1998, currently 8% above the Bank of England base rate, together with a fixed debt recovery cost.
Please confirm in writing that you are happy to proceed on these terms. If you have any questions or would like to discuss any aspect of this, please do not hesitate to get in touch.
Kind regards,
[Your name]
[Your business name]
What to Do If Payment Terms Have Broken Down Completely
If you have exhausted the steps above and payment has still not been made, contact Safe Collections for a free review of your claim. We offer no collection, no commission debt recovery for UK and international B2B debts, which means you pay nothing unless we recover your money.
The sooner you act, the better your chances of recovery. Debts become significantly harder to collect the longer they are left, particularly if the debtor’s financial position is deteriorating.
