Legality around invoicing requirements

Mark Hamill

I asked a question here about 18 months ago in relation to billing trading vs business names and got some very informative answers and discussion and since then I've encountered or heard about other situations that have left me wondering the legality involved, so I thought I would ask again.

I'll preface by saying that all these questions are based on situations without prior written contracts detailing what is supposed to happen.

1). Authorised approvers.
You get a call from someone in a company for some issue that needs attention, you supply/service what is needed and bill their accounts department as per that persons instructions. But then the accounts department calls and says "Oh, the person who called you doesn't actually have authority to call in work, we will need approval from our manager etc.".
Now, I haven't heard of a situation were the company actually continued to flat out deny liability for payment, but what would happen if they did? Is a company automatically liable for payment for any work done for the company called in by any and all of their employees or can they claim ignorance and pass on it?


2) Purchase orders (POs).
Many companies use POs, supposedly as a way to manage money. The idea is that when someone needs work done, they get a price for it, then the accounts department allocates money towards it with a PO number, then an invoice is billed referencing the PO number. If this is prior knowledge and POs are actually supplied with work requests, then it can work fine.
But I've had situations with work being requested by new companies and then after billing in, being told by the accounts department that they use POs and won't pay anything without them. Again, I haven't heard of a situation where payment wasn't eventually made, but what would happen if it wasn't? Presumably they can't legally hold suppliers/contractors to their own terms when those terms weren't explained and agreed upon prior to the work (even if they think they can)?


3) Payment terms.
On our invoices, we have our payment terms as 30 days, and I think that is the way most companies operate. Some companies we bill make payments at certain monthly intervals, and that is fine (once they are upfront with it) and some companies are just slow at paying but eventually do. But I have had experiences of contacting companies to chase up late payment and them saying "Oh, our terms for payment is 60 (or more) days". Obviously this is not something they advertise before you go chasing for payment. Is there a default legal limit for payment?
And lets say the work was arranged by email and at the bottom of their emails it says "payment terms is 60 days", but on our emails it says "payment terms is 30 days". Assuming no other explicit agreement, which term trumps which?

That's all I can think of for the moment, I may think of more later.

4ensic15

If someone has apparent authority, the company is bound. A wise precaution is to insist on a written order on company headed paper or send an order form and have it completed before any work is done.

Once work is ordered, and the order is accepted a contract is made. New terms can't be introduced to the contract other than by agreement.

As above. Under the Late Payments Directives you are entitled to interest after 30 days unless it is expressly agreed otherwise.

Most of your complaints are about delaying tactics and no court will let anyone go without payment for work done on the basis of those antics. The only good news is that they don't like paying solicitors and will pay up when the solicitors letter comes.

Glass fused light

I'll preface by saying that all these questions are based on situations without prior written contracts detailing what is supposed to happen.

1). Authorised approver

As 4enic15 points out you can normaly rely on person presenting themselves as authorised to transact on behalf of the business as being able to bind the company. There would be some common sense limitations in respect of you knowingly suplying goods or services outside the normal scope of their business, off premises etc or if you had direct knowledge of how a business works. Eg the company has how we do business section on their website or in the financial services two authorises signatures would be the norm for large value transactions or the industry norm would be to have a purchasing department.

The real life situation is you contact the person who ordered the job and explain that you hold them personally liable until payment is made and they need to follow up internally, if this fails the supplier can escalate within the management structure and/or go legal.


2) Purchase orders (POs).
Companies use POs, to control who can place an order and the upper value limit the person can contract to. Accounts won't pay out on unapproved spending, but should have an internal resolution process as it's a control issue if an employee is not following the company process.
It can also be a deliberate tactic to extend credit.

Again without prior knowledge of the contract term, the new company can't impose a PO, but this means going back to the person who ordered, if they cant or won't organise a PO the supplier then needs to escalate within the management structure or go legal.


3) Payment terms.
payment terms as 30 days for a new company is loaning a stranger on the street money and hoping they give it back. Terms are dependent on who made the offer and who accepted. If it was a single contact both ways the company initaly approaching the supplier it has to accept the known terms of its supplier, if they counter offered the supplier could be accepting the customers terms.

In real life the supplier gets paid in 60 days and has to make a decision if they want to continue to do business with the new customer with 60 day credit or are they in a position to get the company to pay within 30 days.


Most of the issues can be avoided by having a proper on boarding procedure in place. The mantra cash is king is very true. Most business forget to expand this into a sale is not a sale until its paid for. It's cheaper to lose a margin on a sale that to make up additional margin to cover the lost input costs.

The on boarding of a new client should gather the payment process and other information from whomever is placing the order. From the role of the person to what is required at the delivery time to the contact name and detailed of who sets up the payment details of the accounting package. It should include some form of credit check, for some small business this can be as simple as a reference from another supplier known to the supplier.
Key terms like payment and returns etc. should be made clear at the initial point of contact. The T&C should ideally be on every document used during a transaction. The full terms and conditions should be available and sent or post or fax or email to the accounts department with a thanks for the order and the bank details as the front page and a phone number and name for verification. If using email the bank details should be noted to be sent in, in hard copy by post or fax, on your side the supplier should make it clear who had the authority to change bank accounts details.

Mark Hamill

Thanks for the responses so far .

Glass fused light wrote: »

Most of the issues can be avoided by having a proper on boarding procedure in place. The mantra cash is king is very true. Most business forget to expand this into a sale is not a sale until its paid for. It's cheaper to lose a margin on a sale that to make up additional margin to cover the lost input costs.

The on boarding of a new client should gather the payment process and other information from whomever is placing the order. From the role of the person to what is required at the delivery time to the contact name and detailed of who sets up the payment details of the accounting package. It should include some form of credit check, for some small business this can be as simple as a reference from another supplier known to the supplier.
Key terms like payment and returns etc. should be made clear at the initial point of contact. The T&C should ideally be on every document used during a transaction. The full terms and conditions should be available and sent or post or fax or email to the accounts department with a thanks for the order and the bank details as the front page and a phone number and name for verification. If using email the bank details should be noted to be sent in, in hard copy by post or fax, on your side the supplier should make it clear who had the authority to change bank accounts details.

This is great in theory, and I do try to push a lot of this in my company, but a lot of our work is emergency based and the customer always wants it done as quick as possible. If you suggested organising almost any of this before doing the work, they would just go with a competitor who was willing to worry about it afterwards.

Glass fused light

Mark Hamill wrote: »

Thanks for the responses so far .



This is great in theory, and I do try to push a lot of this in my company, but a lot of our work is emergency based and the customer always wants it done as quick as possible. If you suggested organising almost any of this before doing the work, they would just go with a competitor who was willing to worry about it afterwards.

Appart from the credit check most of the details can be picked up in a 5 min conversation as you discuss what will be done

Filled on old fashioned multi layer carbon paper or on an email producing project management database which links into your invoice system or anything in between.

Name
Role
Phone no
Email address
Business name
Address of business
Address of works
Contact on location
address for billing and sending bank data
Contact for billing (name fax email)
Reference for billing ie PO no
how you charge out explained
Payment terms explained + any other deal breakers*
estimated cost for job
how you will deal with unexpected costs ie who you ask for approval
Estimate time you will show up


* deal breaker is if I expect you to mop up the overflow from the waste pipe that's dripping from the 4 walls and you are just replaceing the pipe and handing me a bucket and mop and patting me on the shoulder.


It's a good professional phone closer which you can read back with your expected arrival time, and if they agree they are agreeing to your terms.

Once the job is done or invoiceable send in the invoice which can have your bank data on it, and enclose a separate page with your bank details on business letterhead. Call with in 15 days if your think you need to follow up to confirm payment will be in the next 30 day payment run.


The balance is can the time spent chasing money be better spent chasing profit. And what's the bad debt ratio or even the cost of cashflow. If you pay staff and materials in advance of payment if your paying out in 30 days and collecting in 60, Sometimes it's better that your competitor is worring about it rather than you.

Mark Hamill

Glass fused light wrote: »

Filled on old fashioned multi layer carbon paper or on an email producing project management database which links into your invoice system or anything in between.

Name
Role
Phone no
Email address
Business name
Address of business
Address of works
Contact on location
address for billing and sending bank data
Contact for billing (name fax email)
Reference for billing ie PO no
how you charge out explained
Payment terms explained + any other deal breakers*
estimated cost for job
how you will deal with unexpected costs ie who you ask for approval
Estimate time you will show up

Again, good in theory but the important parts (from a billing perspective) can fail in practise.

I've asked about references for billing and been told "just put my name" by the managers who called in the work, only to weeks or months later and after statements being sent finally being told by accounts departments that nothing gets paid without POs.

Hell, I've asked new clients for where to send the bill, been given their own company email addresses (e.g. manager@company.ie) and then heard nothing back for months, all emails unopened and ignored. Ring the company in questions main number, get through to accounts to chase up the bill, first they've heard of it and they say "Oh, of course they [the manager] didn't do anything with the email, they have nothing to do with payments, who gave you that email address?" :rolleyes:.

Many people, even whole departments in companies don't really know or care how their own accounts organise payments, they just want their emergency sorted. And this doesn't just happen the first time with new clients. We have written contracts with some companies detailing who can authorise work and telling us specifically not to do anything not authorised in advance by those specific people, and we still get calls and emails from other people in the same company for work, even though they know as well who the calls have to come from.
If it's a type of work specifically contracted to us, or that we know won't go to a competitor then we can wait. But there are times were if we wanted to wait, the customer would just call someone else and we would loose a sale so we just have to put up with their accounts department giving out to us because their other employees don't know their own policies.

Glass fused light

If you have staff going on site get them to stop bypassing the reception desk and access that fount of information available to verify what should be done with the invoice. Reception are the ones the putting the calls through to all the departments and are the normaly a great source of information.

I am lazy, if you want to get paid, all invoices are addressed to
accounts dep
Business
Address
Contact name (me)
printed and posted by snail mail.
That way accounts, not me, gets the big physical stack of paper clogging up their desk and I don't have to press the print button and walk all the way to the printer and then walk down to accounts to get it stamped and processed. I am way too important to worry if you can feed your kids off credit.:)

If you don't get a call to verify the bank details set up from large companies flag for early credit control. Same with the "just put my name" invoices.

Management of calls coming in outside the contract have to be managed with the agreement and support of the guys in charge of the contract. Other than that all you can do is start calling accounts early day 15 or so for high value invoice.

4ensic15

One thing you can do is record the call at the start. Tell the person calling you that you are recording the call. As the person to confirm that they have authority to call you and place an order and incur a liability on behalf of the company.