Skip to main content

Payment Strategies

Strategic payment terms and methods help you get paid faster and reduce payment problems. This guide covers different payment strategies for different situations.

Payment Strategy Overview​

Choosing the Right Strategy​

Factors to consider:

  • Job size
  • Customer type
  • Job complexity
  • Your cash flow needs
  • Customer relationship
  • Risk level

Payment Term Strategies​

Due on Receipt​

Best for:

  • Small jobs (<£200)
  • Emergency work
  • One-off customers
  • Quick fixes

Advantages:

  • ✅ Immediate payment
  • ✅ No waiting
  • ✅ Better cash flow
  • ✅ Simple

Disadvantages:

  • ❌ May put off some customers
  • ❌ Not suitable for large jobs
  • ❌ Customer may not have funds ready

Example:

  • Small repair: £150
  • Payment due: Immediately
  • Customer pays on completion

Net 7 (7 Days)​

Best for:

  • Small to medium jobs
  • Regular customers
  • Standard work

Advantages:

  • ✅ Reasonable payment time
  • ✅ Customer-friendly
  • ✅ Still relatively fast
  • ✅ Standard practice

Disadvantages:

  • ❌ Week wait for payment
  • ❌ Some may still delay

Example:

  • Job: £500
  • Invoice date: 15 January
  • Due date: 22 January (7 days)

Net 14 (14 Days)​

Best for:

  • Medium jobs
  • Standard practice
  • Most customers
  • Balanced approach

Advantages:

  • ✅ Industry standard
  • ✅ Customer-friendly
  • ✅ Reasonable time
  • ✅ Most accepted

Disadvantages:

  • ❌ Two week wait
  • ❌ Some may still delay

Example:

  • Job: £1,000
  • Invoice date: 15 January
  • Due date: 29 January (14 days)

Net 30 (30 Days)​

Best for:

  • Large jobs
  • Commercial customers
  • B2B work
  • Established relationships

Advantages:

  • ✅ Customer-friendly terms
  • ✅ Suitable for large amounts
  • ✅ Standard for B2B
  • ✅ Builds relationships

Disadvantages:

  • ❌ Long wait for payment
  • ❌ Cash flow impact
  • ❌ May need deposit

Example:

  • Job: £5,000
  • Invoice date: 15 January
  • Due date: 14 February (30 days)

Deposit Strategies​

Why Request Deposits​

Benefits:

  • ✅ Immediate cash flow
  • ✅ Customer commitment
  • ✅ Covers materials
  • ✅ Reduces risk
  • ✅ Filters serious customers

Deposit Amounts​

25% Deposit:

  • Best for: Medium jobs
  • Example: £1,000 job = £250 deposit
  • Balance: £750 on completion

50% Deposit:

  • Best for: Large jobs
  • Example: £2,000 job = £1,000 deposit
  • Balance: £1,000 on completion

Materials + 25%:

  • Best for: Jobs with significant materials
  • Example: Materials £500 + 25% of labour
  • Covers materials and commitment

When to Request Deposits​

Always request for:

  • Jobs over £500
  • Jobs requiring materials
  • New customers
  • Large installations
  • Jobs with long timelines

Consider for:

  • Medium jobs
  • Regular customers (if job is large)
  • Jobs with uncertainty

May not need for:

  • Very small jobs
  • Established regular customers
  • Emergency work
  • Very quick jobs

Split Payment Strategies​

50/50 Split​

Structure:

  • 50% upfront
  • 50% on completion

Best for:

  • Large jobs
  • Installations
  • Jobs with materials
  • New customers

Example:

  • Job: £2,000
  • Deposit: £1,000 (upfront)
  • Balance: £1,000 (on completion)

33/33/34 Split​

Structure:

  • 33% upfront
  • 33% at milestone (e.g., materials delivered)
  • 34% on completion

Best for:

  • Very large jobs
  • Long timeline projects
  • Complex work
  • High-value installations

Example:

  • Job: £3,000
  • Payment 1: £1,000 (upfront)
  • Payment 2: £1,000 (materials delivered)
  • Payment 3: £1,000 (completion)

Milestone Payments​

Structure:

  • Payment at each major milestone
  • Protects both parties
  • Ties payment to progress

Best for:

  • Large projects
  • Long timelines
  • Complex work
  • Commercial projects

Example:

  • Job: £5,000
  • Payment 1: £1,500 (start)
  • Payment 2: £1,500 (materials installed)
  • Payment 3: £1,500 (testing complete)
  • Payment 4: £500 (completion)

Payment Method Strategies​

Bank Transfer Preferred​

Why:

  • Most common method
  • Fast (usually same day)
  • Easy to track
  • Free for customer
  • Secure

On invoice:

  • Make bank details very clear
  • Include payment reference
  • Format sort code clearly (XX-XX-XX)

Card Payment on Site​

Why:

  • Immediate payment
  • Customer convenience
  • No waiting
  • Professional

Setup:

  • Get card reader (Square, SumUp)
  • Accept on-site
  • Small fee (1.5-2.75%)
  • Worth it for speed

Multiple Payment Options​

Offer:

  • Bank transfer (preferred)
  • Card payment (on-site)
  • Cheque (if needed)
  • Cash (small amounts)

Benefits:

  • Customer choice
  • Faster payment
  • More flexibility
  • Professional

Payment Incentive Strategies​

Early Payment Discounts​

Structure:

  • 2% discount if paid within 7 days
  • 5% discount if paid within 3 days
  • Small discount, big speed impact

Best for:

  • Large invoices
  • When cash flow is tight
  • Regular customers
  • Encouraging prompt payment

Example:

  • Invoice: £1,000
  • 2% discount if paid in 7 days: £980
  • Customer saves £20, you get paid 7 days faster

Late Payment Charges​

Structure:

  • 8% interest per year (UK legal right)
  • £40 recovery costs (invoices £1,000+)
  • £70 recovery costs (invoices >£1,000)

Best for:

  • Protecting yourself
  • Commercial customers
  • Large invoices
  • After final notice

Include on invoice:

  • "Late payment may incur charges..."
  • State fee amount clearly
  • Reference Late Payment Act

Payment Strategy by Job Type​

Small Jobs (<£200)​

Strategy:

  • Due on receipt or Net 7
  • Card payment on-site preferred
  • Cash acceptable
  • No deposit needed

Example:

  • Small repair: £150
  • Payment: Due immediately
  • Method: Card or cash on-site

Medium Jobs (£200-£1000)​

Strategy:

  • Net 14 standard
  • Consider 25% deposit
  • Bank transfer preferred
  • Card payment option

Example:

  • Installation: £750
  • Deposit: £187.50 (25%)
  • Balance: £562.50 (Net 14)

Large Jobs (£1000+)​

Strategy:

  • 50% deposit upfront
  • 50% on completion
  • Or milestone payments
  • Bank transfer preferred

Example:

  • Large installation: £3,000
  • Deposit: £1,500 (upfront)
  • Balance: £1,500 (on completion)

Emergency Work​

Strategy:

  • Due on receipt
  • Card payment on-site
  • Premium rate justified
  • Immediate payment

Example:

  • Emergency call-out: £200
  • Payment: Due immediately
  • Method: Card on-site

Customer-Specific Strategies​

New Customers​

Strategy:

  • Request deposit (25-50%)
  • Shorter payment terms
  • Clear communication
  • Protect yourself

Why:

  • No payment history
  • Unknown reliability
  • Higher risk
  • Need protection

Regular Customers​

Strategy:

  • Standard terms (Net 14)
  • May extend to Net 30
  • Build relationship
  • Trust established

Why:

  • Payment history known
  • Relationship established
  • Lower risk
  • Can be more flexible

Commercial Customers​

Strategy:

  • Net 30 standard
  • Larger invoices
  • Formal terms
  • May need credit check

Why:

  • Business to business
  • Standard terms
  • Larger amounts
  • More formal

Key Takeaways​

✅ Match strategy to job - Different jobs need different terms

✅ Request deposits - Protect yourself on large jobs

✅ Make payment easy - Multiple methods, clear details

✅ Use incentives - Early payment discounts work

✅ Protect yourself - Late payment charges for protection

✅ Be flexible - Different customers may need different terms

✅ Document everything - Clear terms prevent disputes

Next Steps​

  1. Review your current strategy - What terms do you use?
  2. Match strategy to job type - Small, medium, large
  3. Consider deposits - For large jobs
  4. Offer multiple payment methods - Make it easy
  5. Set clear expectations - Communicate terms clearly
  6. Track results - See what works best

Remember: The right payment strategy balances customer needs with your cash flow requirements. Choose strategies that work for your business and customers.