What is the legal payment term?

What is the legal payment term?

 The statutory payment term is the maximum period within which an invoice must be paid. This is an important part of financial and legal agreements between companies and governments. In this knowledge article, we explain what the statutory payment term is, which rules apply, and what you can do if the term is exceeded. In addition, we answer frequently asked questions and provide a number of practical examples.

What does the statutory payment term mean?

The statutory payment term is a fixed period within which an invoice must be paid. This term is intended to ensure financial clarity and stability. After all, it would be unworkable if you as an entrepreneur had to wait years for your money.

Rules regarding statutory payment terms

There are specific rules for the legal payment term in the Netherlands.

Business to business (B2B)

• The maximum legal payment term in the Netherlands is 60 days.
• Other agreements can sometimes be made in a contract. 
• Other agreements have also been made for payments from large companies to SME entrepreneurs. For example, a large company must pay an SME within 30 days.
• A payment term of more than 60 days is only permitted if it can be demonstrated that this is not detrimental to the buyer or seller.
• Has no payment term been agreed? Then a payment term of 30 days applies.  
  
  

Government agencies

• Governments must pay invoices within 30 days.
• There are exceptions where the payment term may be extended to 60 days.
  
  

Why is the statutory payment term important?

The statutory payment term is essential for:

• Cash flow management: Companies can better plan and manage their liquidity if they know when they can receive their money.
• Protection against non-payment: It provides legal support for late payments. After the payment term has expired, companies may proceed to (extra)judicial collection of invoices. 
• Fair trade practices: It prevents larger companies from imposing unreasonably long payment terms on smaller suppliers. Large companies could hold small companies, who may be more dependent on a particular cash flow, in their power.
  
  

What to do if the payment term is exceeded?

If an invoice is not paid within the payment term, you as an entrepreneur can take the following steps:

1. Send reminder: Send a (friendly) payment reminder a few days after the term has expired. Also try to find out why the customer has not paid yet.
2. Send a reminder: Clearly state that additional costs or interest will be charged if payment is not made again.
3. Hiring a debt collection agency: If the customer has not paid after sending one or more payment reminders, it is advisable to to engage a collection agencyThe collection agency specializes in collecting unpaid invoices.
4. Legal steps: If the customer has not paid even after an amicable debt collection process, you can proceed to legal proceedings. At incasso.nl we always give you good advice in advance about the feasibility of a legal debt collection process. This way you avoid negative surprises and you have a realistic picture of what you can expect.

In general, do not wait too long to take action. The younger an invoice is, the greater the chance that it will be paid. As an FHI member, you can always have a no-obligation chat with one of the collection specialists at Ultimoo Incasso. More information about this service can be found on the special members page.