There is a growing need to choose the correct payment terms for invoices to individuals, following several years of entrepreneurial spirit in the UK workforce.
Since the onset of the recession in 2007-08, and the rise in redundancies during the worst economic period, many Brits have created jobs or incomes of their own – and several different terms are bandied about for this.
In general, these self-employed individuals may be referred to as freelancers or contractors, while those who are more organised in their branding are often called micro-businesses, especially if they have been successful enough to hire an assistant.
Depending on your industry, you might also supply certain other individuals who are effectively ‘just people’ – for example, reluctant landlords who have been forced to rent out a spare room to make ends meet.
For all of these different kinds of individuals, it is important to choose the correct payment terms for invoices you issue to them, especially as their personal finances – and not just their business finances – are likely to affect their cash flow and their ability to pay what they owe.
Over the course of the recession, low interest rates meant little increase in people’s savings, and a shortage of work may have left many people struggling to get by over the long-term too, as figures from the TUC show.
In its report, the organisation reveals that November 2015 saw the largest monthly rise in consumer debt since early 2008, as many households simply ‘put Christmas on credit’ due to a lack of available funds.
TUC general secretary Frances O’Grady said: “Rising household debt signals that too many people are still struggling to make ends meet. With pay growth slowing, and households facing a lost decade on wages, it’s no surprise that more families are relying on borrowing to meet the costs of day-to-day essentials.
“Although employment has risen, wages are still worth less today than eight years ago. This has left families struggling to meet the rising cost of living. We need a recovery where families can afford to pay their bills and raise their children without relying on credit cards and payday loans.”
More importantly, in light of the rapid rise in self-employment, freelancing and entrepreneurial spirit in general, it is essential that suppliers put in place the right payment terms for invoices to individuals, so that it is possible to take action on unpaid invoices that play second fiddle to domestic expenses.